All startups require capital to jumpstart the business and keep the operation wheel going. However, if you are an entrepreneur, you probably know that it’s not an easy feat to collect the funds necessary for your business, not to mention the amount of confusion when it comes to finding a good source that you can get your funds from. But don’t sweat it, this guide will present you with several options that provide money for startups.
Angel investors are individuals who fund startups in exchange for ownership equity. The funds they give to startups are often a one-time thing, just to help businesses kickstart. What’s good about angel investors is that their terms are often lenient, unlike other money lenders. They only invest in startups to support entrepreneurial individuals rather than the business itself. Unlike venture capitalists, angel investors don’t care about profit; they just care to help businesses take their first steps.
In recent years, many startups have begun to rely on crowdfunding websites to gather the funds they need for their business. Crowdfunding allows you to receive donations from a large crowd through a funding campaign. The way it works is that you set the monetary goal on a crowdfunding website with a description of your journey and where the money is going. Afterward, you share the funding campaign with your friends, family, and strangers, so they can donate money until you reach your goal. Many businesses that are now very successful have used this method to launch their businesses.
Getting a Business Loan
There are loans made specifically for entrepreneurs who are looking to fund their businesses., and the types of loans differ according to your needs. The first type is called factoring, which involves selling your unpaid invoices to the lender for an advance that ranges between 60% to 90%. The lender then collects the money from your client and pays you the remaining percentage, and then they take a fee for this transaction. The perk about this type of loan is that the invoice itself is the collateral so your credit score doesn’t matter. It is helpful in case you have already started your business and found that you need funding along the way.
The second type is a business term loan, which could either be long term or short term, a small amount of money, or a large amount of money; it all depends on your needs and the lender’s requirements. However, loan terms usually range from 1 to 5 years. A big advantage of this type of loan is that your application can be approved within days, and sometimes just mere hours. If you are confused about what kind of business term loan suit you need, click here to learn more about them. It’s worth mentioning that if you have a bad credit score you might need to provide collateral.
The third type could be familiar to you if you’ve used credit cards before. Business line credit has the same qualities as a credit card. You get approved for a maximum amount that you can borrow, and you pay interest only for the amount that you borrowed. Additionally, you receive your approval faster than other types of loans, and it’s suitable if your credit score is not perfect. However, this type has a drawback: if you miss a repayment, you have to pay a hefty penalty.
Incubator or Accelerator Programs
Incubator and accelerator programs are made specifically to assist startup companies. They are available in almost all major cities. The difference between these two programs is that an incubator program is akin to how a mother nurtures their child; the program is made to nurture the business. Incubator programs provide tools and networking options for business owners. On the other hand, accelerators provide the same thing that an incubator program provides, but they focus more on making giant leaps in business. In other words, while accelerator programs focus on growth, incubator programs focus on innovation. The duration of these programs usually ranges between 4 to 6 months, which is why you have to make sure that you are fully committed to finishing these programs.
We live in simpler times where the advancement of technology allows anyone with a good business idea to turn it into a reality. Investors and companies are competing on providing great options for entrepreneurs to acquire funds. Now that you have many options that you can choose from, you can confidently seek the funds you need and give a green light to your business operations.