If you are a new entrepreneur, then procuring funds for your small business is your biggest challenge. How you are going to overcome this challenge becomes a big and pertinent question for you. You can take into consideration different financing options for your startup that are available in the market and go for the one that suits your specific needs. Always remember that financing a startup business is a daunting task and you will have to face many hurdles to make it a successful one.
Questions you should ask before looking for finance for your startup
Given below are certain questions that you should ask:
??When and for how much time do I need the finance?
??How much finance do I need?
??Am I ready to relinquish some extent of ownership or control of the start-up business reciprocally for investment?
??What security (if any) can I furnish? Key areas that you should take into consideration while financing a startup At the time of financing a startup, the following are the key areas that you need to take into consideration:
??Establishment costs (the costs that are necessary prior to the commencement of business operations)
??Working capital ? also described as current assets minus current liabilities. Current assets include the stocks required by the enterprise or organization, for instance raw materials, cash and cash equivalents, accounts receivable, prepaid liabilities and short-term investments. Current liabilities include accounts payable and other outstanding expenses.
??Initial investment (the fixed assets required prior to commencement of business operations)
??Maturity and prosperity (for example, additional investment in capacity)
Innovative ways to finance a startup
Some innovative ways to finance a startup are given below:
1) Bootstrapping
Bootstrapping is financing your business on your own or without anybody?s help. For example, you can take a home equity loan to finance your startup.
2) Tapping your family and friends
This is also another good option. If you know people who can lend you money with simple repayment terms and conditions, you can borrow from them without keeping any hesitation in your mind.
3) Small business administration (SBA) loans
This is another useful source of startup financing. You cannot directly finance your startup through SBA but it can partly back your loan that has been secured from an insurance company, bank or any other financial services provider. However, keep in mind that there is plenty of paperwork involved.
4) SBTT and SBIR grants from the government
Both small business technology transfer grants and small business innovation research grants are excellent sources of startup financing, provided you are eligible for these loans/grants. These are popular federal grants that are available from the departments of Energy, Agriculture, Defense and also some other agencies.
5) Angel Investors
Angel investors also work as a reliable source of startup financing. This is a form of equity financing. If any angel investor is financing your small business, they will also enjoy a part of the ownership of the enterprise and it is the rule. However, you should not expect a huge investment on their behalf into your firm.
6) Bank loans and bank overdrafts
You can also finance your small business with bank loans and overdrafts. In comparison to bank overdrafts, bank loans are available for more extensive periods. You need to provide a security against the loan and the interest rates are usually less than that of a bank overdraft.
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Source: http://increaserss.com/innovative-ways-to-finance-a-startup/
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