The most challenging for a start-up and new business is the sourcing of fast financing for start-up business. Usually, all start-up business owners would always put a top priority to ensure that there is money to get the business concept into a reality. However, putting all personal and hard-earned money is not good at all. Total dependence on the business loan may not also be better.As a self-starter business person, diversifying the resources will lower the risk. Finding the source of funds could be tricky. Thus, traditional lenders and banks will be likely to give their financing packages to you. Moreover, common mistakes of business start-ups are the owners are in a rush and forgot to plan.
Steps for fast financing for start-up business
Step 1
Get back to your business plan and analyze your budget plan. Then, look at your forecast sales and expenditures every month. Do not forget to be realistic. Determine what the months or days that there could be possible lower sales are. Know how much resources you have right now that you are ready to finance some costs in the budget plan.
Step 2
Determine what precisely in the budget plan you would require financing and how much you need. Normally, expect that start-up business will be spending much in the starting years. The high spending rate will continue until the company will breakeven. Determine also if your business is seasonal, i.e., toy manufacturing. The cash flow of this type of business can be predictable.
Step 3
Consider some contingency funding because there may be unexpected problems that entail costs. Review back your business plan and know what the risks to manage.
Step 4
ase on the review of all your forecast and figures, decide how much financing you require. Thus, access to start-up financing is used to cover development costs and start-up losses. Hence, the sources of finance are your own hard earned money, friends, family and investors.
Step 5
Determine what short-term and long term that will suit your needs. Their banks are offering overdraft funding. You pay interest on the amount you overdrawn each day. There are financing facility of lenders that provide a more significant amount of credit but higher risks and complex requirements.
Step 6
Check your qualifications for any start-up financing support. Thus, the qualifications and requirements depend on the institution offering the loan opportunity for starting-up businesses. In addition, prepare all the documents and make a self-assessment to build your confidence to make the loan application get the approval.
Step 7
It is advisable that you should not rely on your business start-up to financing. You may have saved some money where you can use to start-up. You might also have some investments like properties you can sell to use the profit as start-up capital. The point here is that you should diversify the source of fund to kick-off your business.
The government is now helping and encouraging entrepreneurs to set up a business and open accessible fund sources. However, as a business newbie or starting a new business in town, you must always
remember that nothing is free. Lenders often look for something in return for their money that goes out via credit. Usually, a loan will need collateral or personal guarantee.
The top Start-up financing strategies
1. Crowdfunding
The concept is to use the power of online platforms such as social media. The crowdfunding strategy could be peer-to-peer lending, peer-to-business lending, reward-based, and equity.
- Peer-to-peer lending will involve individual investors lending money to an individual for a fixed interest rate
- Peer-to-business is a loan for business via investors, companies or government institutions
- Reward-based crowdfunding is you receive funds from investors in exchange for your products or services.
- Equity crowdfunding is offering shares or equity of your company in exchange for investment.
Usually, the reward-based crowdfunding is the most effective and fastest for start-up business. Crowdfunding technique has been popular not only for having a lesser risk but it rewards unique and innovative business ideas.
2. Short-term loans
These are straight loans with a pre-agreed period and interest rates. The loan period is the shorter and higher interest rate. The investment is relatively expensive. There is a need to have some security or guarantee to acquire the credit facility. If your company have outstanding invoices, this loan facility is the right one for you. For banks, they can loan up to 85-90% the value of the unpaid invoices. These can be paid back once you receive the payments.
3. Business Grants
The government is empowering the start-up businesses. The Local Enterprise Partnership (LEP) is one of the government grants that offer grants in countries within the EU. The Competitiveness of Enterprise and SME (COSME) of the European Commission also provides funding for small and medium enterprises. Competitions can also be a great opportunity to source for funding. For example, the VOOM Pitch of the Virgin Enterprise gives the starting business the chance to pitch their concepts and innovation to Sir Richard Branson and win prize money.
4. Angels
There are wealthy individuals and retired company executive who are still wanting to be in the business field. These people are still willing to invest directly to small firms owned by others. They are seasoned
and full of wisdom in their area that can contribute experience, network, technical knowledge, and management knowledge. Because of their rich experience, they have the right to supervise the management practices . It can be done by taking a seat on the board of directors.
5. Venture capital
Venture capital is a specific start-up financing strategy. The capitalist habitually looks for technology-driven business with the potential to grow big. Usually, the venture capitals take an equity position in the company. It is because they want to be part of managing the high risk and high return of their investment. If you want to venture in capitalism, be sure that the investor will bring relevant experience and knowledge for your business.