For most entrepreneurs ideas for the creation of marketable solutions and products come off as second nature, what is, in fact, hard to obtain is a financial front to back these ideas up. In a world where money is critical to the pursuant of virtually every goal, the difference between successful and unsuccessful entrepreneurs is now more than ever tied to securing the right source of small business funding.
The good news is that most economies in the world today recognize the importance of startups as the drivers of sustainability and vibrancy in any economy. In this light, a lot of funding opportunities have opened up geared to provide well worthy start-ups the chance to establish and gain a foothold in the overly competitive business market of the 21st century. That said it is pertinent to note that although the last decade has seen a promulgation of a diverse range of funding sources not every one of them is suitable for all kinds of businesses; this article helps you delineate the best sources of financing for your business start-up.
Crowdfunding is one of the more recent and increasingly popular ways of funding business startups. To get access to this source of funding an entrepreneur has to convince a large demography of people that he/she has a solid plan guaranteed to make profits after kickoff. This demography of individuals is usually hosted on a crowdfunding website; prominent examples of which are Kickstarter or Indiegogo.
Inasmuch as it is easy to kick start a crowdfunding campaign, it is important to bear in mind that several other prospective entrepreneurs are also keen on taking advantage of this ease of application, the result: crowdfunding sites are usually laced with a conglomerate of future entrepreneurs. The onus is on the entrepreneur to create a thorough and captivating business plan (emphasis on captivating) that is guaranteed to appeal to the viewing audience. Many now prominent companies, including the Oculus Rift, the Purple mattress were all backed up by crowdfunding.
For entrepreneurs seeking an immediate boost in the way of funding bereft of the bureaucracy and long waiting time associated with most other funding sources, the best go-to option is probably Angel investors. Unlike other sources of financing, which will prefer organizations domiciled in the US. Angel Investors like Holgerfeld will provide funding and even lease assets to corporate firms and private individuals in countries members or not of the European Union, Asia, Africa, North America, Central America, South America and the Middle East. However, this comes at a price. Usually, Angel investors demand a hefty chunk of the company in return for their cash; but considering the fact that they do not need any collaterals/sureties and since they also shoulder the risk bearing of the company, they offer a competitive option. Firms like Geneva Investors (a cluster of Angel Investors) defer from the status quo of requesting for majority shareholding and promise to accept a minority share in exchange for funding for start-ups in a diverse range of fields that include real estate, renewable energy, and even mining.
In the past Banks where the first consideration for anyone looking for funds to set up a business; even today they still are a viable option. The problem with banks is that they need a collateral and are very reluctant to grant loans to untested business models. Also, the loan application process for banks is probably the most tedious of all methods outlined in this write-up; the prospective entrepreneur has to outline without missing a single detail, every step and process involved in taking the business from start-up to full scale.
That said for entrepreneurs who have already tested the worth of their businesses and are in need of funds primarily for expanding market reach; banks are probably the best option since unlike the rest, banks are not known to request for any form of control over your company in exchange for funds.
Venture capitalists are professional groups of Investors who intentionally seek out promising start-ups with the aim of backing them up financially. With venture capitalists, the amount of funding needed is not an issue, as they are ready to invest as much as is necessary provided they are met with a valid business plan. However, like Angel Investors, Venture Capitalists will also demand a considerable share of the company but with the added advantage of providing mentorship to the entrepreneur. Since venture capitalists are usually industry veterans, their mentorship and advice are invaluable to steering start-ups to market domination. There is an abundance of venture capitalist options in the cooperate world each with peculiar advantages over the other. Venture capitalists like Capital Swiss Corp, a strategic investment group promise backing to start-ups and established businesses alike, provided they differentiate themselves and offer a clear strategic advantage over the competition in the same field of operations.
Typically provided by the government and NGO’s, grants are virtually risk-free and do not require any form of collaterals. What they do require is a concise and succinct outline of the business plan of the entrepreneur. As is expected, given that they are free of charge and orchestrated by the government competition is steep, waiting time is extended, and bureaucracy is dominant. That said for entrepreneurs with truly game-changing innovations; grants are a sure-fire way to boost their business to market domination.
In the end, the best source of funding suitable for any business is dependent on the long-term goals of its founders. For those seeking a slow but steady rise to prominence, the more subtle government grants and crowdfunding options are good options. Entrepreneurs seeking a direct and accelerated climb to market dominance are better off with the other three choices.