Most startup businesses require some form of financial backing to get started. This can be in the form of a bank loan or investments from professional investors like angels and venture capitalists.
Entrepreneurs can also self-fund their business. This method gives them complete control over the company, but comes with a high level of personal financial risk.
Online Lenders
Many online lenders, including alternative lending platforms, have emerged that offer fast and easy financing for startup businesses. They often have less strict credit requirements and more flexible loan terms than traditional lenders, such as banks and credit unions.
Many small local businesses, such as a dry cleaner, restaurant or yoga studio, also have unique financing needs. Some local financial institutions, such as community development financial institutions (CDFIs) and nonprofit lenders, may have specialized programs that can help startup businesses.
Personal loans and crowdfunding are also common sources of funding for startups. Crowdfunding is particularly appealing because it can allow you to incentivize supporters with equity in your business or rewards, such as products or swag. However, it’s important to understand the trade-offs and risks before pursuing this option.
Self-Funding
Using personal savings, family contributions and other personal financial resources to finance a startup is called self-funding. This is a way to maintain full control of the company but can also mean taking on substantial personal financial risk.
If the business fails, you will be responsible for meeting your financial commitments and liquidating assets. However, if the business is successful, you will benefit from a high degree of ownership and autonomy.
Choosing how to finance your startup is one of the most important decisions you will make for your company. It can impact everything from how you run and structure your firm to how much capital you have at your disposal. Fortunately, there are tried and tested personal business funding options to consider. Depending on your situation, these may include:
SBA Loans
The Small Business Administration offers a range of funding options, including grants and loans. These loans offer competitive interest rates, flexible terms and counseling to help businesses start and run successfully. Loan programs include the SBA 7(a) loan program, microloans and export loans.
These loans can be used for most types of business expenses, but some lenders limit the uses of loan funds. For example, a working capital business loan must be repaid within one year. Loan amounts vary and may require collateral such as real estate or equipment.
The SBA microloan program is available to small- and medium-sized businesses. These loans are backed by the Small Business Administration and administered through approved intermediaries, such as nonprofit community lenders. These loans are typically less expensive than larger-dollar loans, and they can be awarded to borrowers with poor credit. However, these loans require personal guarantees and may require extensive documentation to qualify for. The application process is often lengthy and time-consuming.창업아이템
Venture Capital
Venture capital is a form of startup financing that involves offering equity in your business to an investor or group of investors in exchange for funds. Startups typically use VC funding to make important hires, develop new products and pursue growth opportunities.배달창업
Brand-new startups that are in the process of developing their concepts may pursue seed or angel funding, while a more established firm with a proven product and sales may receive expansion or growth equity investments. Venture capital is a risky investment for both the VCs and the startup businesses, but it offers a potentially large payoff if it pays off.
Unlike traditional loans, venture capital firms expect high returns on their investments, which can put pressure on startups to achieve rapid growth and meet aggressive financial goals. Moreover, as a startup raises multiple rounds of funding, the founders’ ownership stake in the company can be diluted, reducing their profits upon an exit event like an initial public offering (IPO), merger or acquisition, or secondary sale.