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5 Working Ways to Finance a Business Idea

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Do you have a great startup idea, but don’t know where to find the capital to implement it? You need to remember that great concepts can only be fulfilled only if they have a stable investment. So if your own resources are not enough to make your business idea come true, you may want to consider using alternative funding sources. What are these alternative sources and how should you proceed to convince potential investors of the value of your idea? 

Here are the best techniques for finding financial support for your startup business idea.

 Standard FFR (friends, family, and relatives) 

This is the easiest and frequently used method to finance your idea – receive funds for your business from parents, friends, or acquaintances. Maybe they do not understand the nature of your business idea, but they really want to help you and invest in your startup. It is easiest to get such an investment because you communicate with loved ones, who are often uncomfortable to refuse you. But you can ruin your relationships with your lovely people if your project does not live up to your expectations.  

Business angels

In search of financing for your business, you can turn to entrepreneurship support funds or, if your business idea is innovative and you predict the rapid growth of the company, weigh the possibility of attracting venture capital. Private informal investors – the so-called business angels – usually invest in risky projects that other investors would most likely refuse to finance. In addition, these people tend to share their experience of doing business with young entrepreneurs whose business they undertake to finance, and this can be very helpful.

Crowdfunding

This method is popular among creative startups and social projects. Its essence lies in the fact that the project is financed by a large number of small investors who are interested in your product. In a simplified way, it sounds like “a thread to the world.” As a reward for their investment, investors receive certain bonuses: a finished product, a percentage of future profits, an exclusive product, etc. This method requires building a community ahead of time, thinking about posting from bloggers, and doing a lot of preparatory work to generate traffic when the campaign is launched. 

Business Loan

For most founders, financial issues are at the top of the list of obstacles to launching and promoting a business idea. Even if the funds were sufficient at the initial stage, in the future, they are necessary for the confident formation and development of the project. One of the options for obtaining money to implement your startup is a personal loan for business. 

There are two types of business loans that banks, online lenders offer: secured and unsecured business loans. It’s important to understand the difference between secured and unsecured loans before making the right decision.

The application for a business loan is like applying for a personal loan. You need to provide some details about yourself and your business documentation. 

In any case, before thinking about attracting investment, it is advisable to prepare. What funding option you will choose to invest in your business you need to take into consideration the characteristics of your startup. You can even effectively combine various methods of obtaining financing. You can start with investments of friends and angel investments. Once you understand the potential of your business, you can turn to other larger investment options. There is no need to try to finance your business at once with one source, it is better to move gradually, according to the stages of the startup’s development. First, get funds that will be enough to create a minimal product and test an idea. Once there is a positive shift, it will be easier to attract new investors. This is the most commonsense and economical option.

All you have to do is effectively present your business model to the right people and convince them that your startup has potential. 

Grants and competitions for startups

A tool that allows the best projects to receive funding. Usually, grants are directed to the development of certain industries or technological areas. To get it, you need to win the competition, and then strictly follow the program for using the funding received.

The advantage of such funding is that you do not need to give away any shares of the business, nor the grants themselves, nor interest for their use. The main disadvantage is that the flexibility of the project is reduced since it will not be possible to change the direction of its development.

There are government competitions and grants, but there are also commercial ones: from large companies, universities, or large venture capital funds.