As per a recent study, it was revealed that around 94 percent of all new businesses actually fail during the year it was started. The most common cause of such a debacle is because of a lack of proper funding. We know that funds are supposed to be the lifeblood of all businesses whether big or small. However, startups and small businesses are perpetually in need of funding. Capital is supposed to be the fuel that is required for the smooth functioning of any business. That is chiefly the reason why most entrepreneurs are constantly asking themselves ‘how to finance my business?’ Exactly when you would be requiring funding actually depends primarily on the precise nature and kind of your business. But when you know that it is time to raise funds for your business, you must know that you have a plethora of funding options available to the budding and highly promising American entrepreneurs that could prove very useful to your business in 2019.
As per Forbes, there are several points to consider while you are evaluating funding options in 2019. You must understand the individual implications and choose the funding option that seems best for your precise business requirements. The important points to consider are:
- How fast do you require funding?
- How much funding is required by you?
- How frequently would you be requiring the extra capital?
- Are you having any preferred funding source?
As per https://www.forbes.com, “The importance of each of the individual factors above will depend entirely on your business. So, take some time to review the nature of your funding needs and compare that with your available options to find what works best.”
Now let us explore some of the most important funding sources for your startup or small business. However, you need to examine the credentials and choose only the most reliable and reputable lenders.
While initiating a business, you must act as the first investor for your own business. You could come up with funds either using your own cash or using your property or assets as collateral. This would demonstrate clearly to the bankers and investors how serious you are with the venture and that it is surely a long-term commitment for you. You also, convey the message clearly that you are not at all afraid of taking risks. You do not want anyone else dictating terms and you are happy to keep the profit pie to yourself.
This is the amount loaned to you by your friends, family, spouse, parents or other relatives. Bankers and investors regard this funding as patient capital that is money that would be paid back later as you start getting more profits for your company. However, while accepting love money for investing in your business, you must keep certain facts in your mind such as:
- Friends and family hardly have too much capital.
- Some of them may wish to have equity in this business of yours.
- Never take any business relationship with your friends or family lightly. Be serious and extra careful not to jeopardize your personal relationship on account of the business.
Traditional Bank Lending
We know that acquiring business capital from conventional sources such as a bank after the financial crisis that took place in 2008 has become really very difficult as compared to earlier days. Despite this fact, even today banks are one of the best funding options available to startups and businesses if you are eligible or qualified for such loans. Most of the bank loans seem to be secured and that implies that they would be necessitating some type of hard collateral like property, cash, or asset as a guarantee.
The best thing about bank loans is that they assure exceptionally high credit limits that could well run into millions according to the funding product and institution. In the event, you have a fantastic credit history and credit score, and if you are having a type of collateral that could fetch you a conventional bank loan, you could opt for it assuming it to be a good option and a good decision.
Business Credit Card
In the case, you are looking for a consistent supply of business capital, it is best to opt for a business credit card which could be the right fit for you. In the case, your business is actually seasonal; a business credit card could be offering funds you are always having for tapping into when it is time for investing during the next season. The credit limit on your business credit card would be set according to how robust your personal credit score and history is. If you are in perpetual or consistent need or even when the need is erratic such as seasonal for additional funds, you may opt for a business credit card if you have a preference for keeping everything within one and the same institution that is your bank. For more details, you can visit here.
You must keep in mind while contacting venture capitalists that they do not entertain all entrepreneurs. Venture capital is usually, diverted toward companies and businesses that high growth potential especially, in sectors like biotechnology, communications, and information technology.
Angels are usually affluent individuals or some wealthy retired company executives. They are willing to invest straight away in startups and small businesses that are owned by others. Angels are often known to be masterminds or leaders in their field of work and they not only help by contributing funds but also, their wealth of experience, management and technical knowledge, and even network of contacts. In exchange for, putting their money at risk, they would like to reserve their right to oversee the management practices of the company.
It is a great business strategy not to put all your eggs straightaway in a single basket. This seems to be particularly true when you are thinking of financing your small business or startup. It is a great idea to diversify your funding sources as that would help your startup to get used to handling potential downturns. However, diversification would boost your chances of acquiring appropriate funding for meeting your unique requirements.