Starting a business involves a set of obligations, great responsibility, and good planning. One of the first and main obstacles common to any business is financing. There are several solutions for raising capital for a project, depending on the type of business you want to do.
Traditionally, one of the first options of any entrepreneur looking for capital to start a business is bank loans. However, currently, there are other options for raising capital creatively and realistically.
In this article, we will present some of the most common options for boosting a business, which can help you ensure its viability.
10 types of financing for companies and entrepreneurs
It is important before you start looking for funding for your project, that you have more than one structured idea. Make a study of the market, know your potential customers and your competition, design a realistic but innovative business plan. The more structured the idea and the project are, the greater the chances of finding someone interested in investing and financing your business.
Depending on the project and the stage you are in, there are several financing options so that you can choose the most favorable route for your business, according to your needs.
The bank loans may be requested by any customer of a financial institution. Even today and despite the many innovative options that exist, loans are one of the most common forms of financing.
Financial institutions offer several options, depending on the type of business and your needs or the amortization period. The operation consists of transferring an amount that will have to be returned, regardless of whether it is successful or not.
When starting a business, betting on microcredits may be the ideal option. Microcredit is a small loan that is usually granted to organizations that are not eligible for bank loans because they have a lower level of resources.
Family and friends
Using your closest network and people willing to invest in your project can be a good option to develop a project. However, it is important to keep in mind that, with this group of closest people, it is very unlikely that you will get a large investment.
It is a difficult term to translate, but very specific in the universe of startups. Bootstrap means creating a startup without relying on any outside funding. All profit is invested in the growth of the business.
This is a slow process of growth, which makes it difficult to develop ideas.
Bootstrappers are usually entrepreneurs with much above average capacity and are not beginners. Microsoft is an example of a company created by bootstrapping.
The Factoring is financial support, where financial institutions provide the company a certain amount, to ensure liquidity. It consists of assigning the collection rights of outstanding invoices to a specialized entity and, in return, the company immediately obtains the money from these operations.
Thus, the bank or the financial entity starts to manage the collection of invoices, assuming the risk of the operation and allowing the company to obtain liquidity. Also, by outsourcing collection management, it allows the company to direct its efforts and resources towards tasks that are more relevant to business growth.
Crowdfunding is a relatively recent alternative to financing. It is a crowdfunding method, used to raise capital to start a business or leverage a project, through collective efforts.
Crowdfunding allows entrepreneurs to find multiple investors, instead of looking for one in particular. This method works through online platforms. Entrepreneurs can present a pitch of their business or idea so that interested parties can invest
Typically, these investors make small contributions, but very numerous, taking into account that many people can contribute in exchange for rewards, shares, or shares.
Business Angels are private investors, usually entrepreneurs, who, in addition to capital, invest their knowledge and experience to guide the project and obtain good future results.
These individuals invest their own money in business and are known to help companies grow, through their know-how and contacts. Depending on the investor, the investment may be unique or it may be a financing process that will help the business to overcome various difficulties.
Another financing option similar to Business Angels is venture capital.
It works on a larger scale, with higher financing, and in more advanced business phases. In this case, the financing is carried out through Venture Capital Companies (SCR). These companies invest in startups with innovative projects and high-risk potential, in exchange for a percentage of the company.
Subsidies or public aid
Another way of financing is to resort to subsidies and aids that the public administration makes available to entrepreneurs. Normally, to access these aids, it is necessary to comply with certain requirements.
Incubators and accelerators
Although most incubators and accelerators do not directly finance companies, they are the ideal partners to help you understand the best solution for your business. At the same time, they are the ideal way to put you in touch with the financing you need. Also, incubators and accelerators offer several essential services for the success of any company.
Choose the best option for your business.
These are just a few ways to find financing for your business. However, it is essential to choose the solution that best meets your needs.