Startups require a lot of funding. Whether it’s on a small scale or large, you need enough money to invest in product development, acquiring inventory or paying your employees. Before you venture into a business, you need to carry out a proper research to investigate the economic market of the industry you’re about to step in. This gives you an accurate image of the financing difficulties you’ll be facing in the early stages.
Given the current economic conditions, securing funds is becoming even harder than before. To close on every alternative source of funding, entrepreneurs need to think more creatively not only about how to sell the product, but how better to sell themselves and their ideas.
This might not exactly sound creative but most of the fresh entrepreneurs don’t even consider saving up before coming into the market. Because if you’re not willing to invest your own money in your startup don’t expect investors to do the same. Investors have been in the market long enough to identify entrepreneurs who know what they’re dealing with. Besides investing your own cash will release you from the hassle of paying finance costs attached to loans.
Know your business plan
You need to go beyond superficialities and make it clear to your investors that you know your business plan inside out after all it is, in fact, an accurate business plan that lays a foundation for your success in the future. Show the value and worth of your ideas by communicating your plans for the future. Martin Zwilling of veteran startups says, that ‘to investors, startups without business plans are just expensive hobbies.’
Invest more and more of your time in gathering valuable information about the prevailing markets, your competitors and your target audience.
Maintaining a good credit score
If you want to fund your business through banks, you need to make sure you have a good credit score as it allows you to enjoy numerous benefits. Through this, you’ll be able to attract more banks to provide you with sufficient funds and better loan terms for the future. If you have a poor credit score make sure you increase it before approaching a financial institution. One way is to apply for credit cards, make purchases and paying it off immediately.
If utilized properly, the Internet can work in many great ways. Find a group of like-minded individuals on sites like kickstarter.com. A website where friends, family or strangers decide to fund your startup. Many people have used this approach and are now spreading beyond non-profits and in no time will include the ability to invest in the small business as well.
Factoring is much like PO financing but here a company sells its receivables to a third company or a factoring company at a discount. Rather than waiting for 30-90 days for cash from your debtors, you will be provided with cash immediately on sales. This is a better working approach for high volume startups planning to scale up.
Investing in a startup is no joke which is why you need to start working on it not months, but years before you actually start a business. You need to be around success-oriented individuals who can help your startup, through either investing funds or through expert advice. Networking is an ongoing process and should never be stopped. Another great strategy is to share office space with people who can connect you with investors who might be interested in your proposal.
This is mainly for individuals who don’t normally qualify for bank financing due to poor credit rating or the inability to secure a loan. Small firms as well some private companies offer up to $40,000 to promote entrepreneurship. It’s a non-profit organization that works differently than banks. It requires less documentation and more flexible conditions. “Micro-loans are really for that startup entrepreneur or an entrepreneur in an existing business facing a capital gap who needs to secure capital for new equipment or to service a contract,” says Connie Evans, president, and CEO of AEO, which represents 400 mostly non-profit microlenders and microenterprise organizations.
Vendor financing is where you convince your supplier to defer payments until you sell off your physical tangible inventory. The days by which they defer usually depends on your credit history and extra fees.
In today’s world, Investment Retirement Accounts fund or 401(k)s are the most easily accessible funding source for startups. You aren’t able to invest in your business plans, but many others are willing and will even loan you money from their self-directed funds but only if they believe you and your cause.