Top Sources for Startup Funding

Sourcing funds for your startup business is moderately challenging. No financial institution will give loans to a new company without adequate proof of competency, profitability and solvency.
Only 30% small businesses manage to get bank loans on the strength of documentation. Although the difficulties are real it is not insurmountable.
Luckily there are many ways to source startup funds for your business. Here are a few ways to acquire startup funding.

Top Sources for Startup Funding
  • Personal loans and credit
  • Family and friends
  • Venture capital
  • Angel investors
  • Banks
  • Crowd funding
Make a Budget
Before seeking loans you need to write a business plan and make a budget. The budget should focus on capital costs, operational costs and contingency money.
Operational costs are recurrent expenses such as office supplies, advertisement, staff wages, rent and insurance. You can set aside 9% for contingency, while capital costs are fixed assets and equipment.
Bank Loans
There are different types of bank loans that fall under two categories, secured and unsecured loans. Unsecured loans are drawn on the borrower’s assets.
Unsecured loans include bank overdrafts, personal loans, and peer-to peer lending. Others are credit card, debt cards, lines of credit and corporate bonds.  
Secured loans are pledge loan and mortgage loans. Secured bank loans are the primary way company’s secure funding for their business. The loans are usually short termed or long termed.
Short termed loans attract higher interest than long termed loans. The repayment terms depends on the loan facility and duration.
To secure bank loans you need collateral such as landed property or a building. Other requirements are proof of competence and profitability. 
Banks are usually concerned about getting their money back so they scrutinize the purpose for loan. Other requirements include business plan, guarantors, some startup funds and an account in the same bank.
The account is to make sure of proper accountability and fund remittance. The loans given by banks have either flexible or fixed interest rates.
You will pay more if an insurance package is included in the loan. Before taking the facility make sure you thoroughly scrutinize the loan conditions.
Venture Capitalists
Venture capitalists have collective funds and are eager to invest in any profitable venture. They carry out their own due diligence before partnering with a small business owner.
The investors might require a part share of your company. While some base their investment on profit taking. Usually such investors prefer sponsoring startups aligned with their technical/business preferences.
Crown Funding
Crowd funding uses the financial strength of the collective to fund a project. Crowd funding have become popular via internet mediated registries.
The initiator or small business applies for funds while groups/individuals provide the funding. The funds are usually monitored by a third party mediator.
The funds are available to small business, social services and community based programs. There are two types of crowd fund the reward based funding and equity funding.
Reward based funding focuses on project returns while equity funding requires equity in the startup company. The benefits of crowd funding are reduced costs, increased investment and value to new investors.
The disadvantages to such investors include failure of company, donor exhaustion, abuse of process and poor due diligence.
Angel Investor
Angel investors are usually retired entrepreneurs or top executives. An angle investor’s interest in a venture is not purely monetary and includes mentoring, networking and advice.
This informal lending platform is financed through angel fund raisers, private investor’s angel networks or groups. The investment is usually in exchange for equity, part ownership and convertible debts.  
Angel investor uses their own funds to finance the project and bare extremely high risks. Due to the level of risk they may require very high returns on investment.
Bootstrapping is when a person uses personal finances to start a company. Many company’s get started with little investment or collateral.
They solely rely on personal savings, turnover and lean operations. By not depending on external sources you tend to keep 100% of your equity.
Bootstrapping can be achieved through target funding and regular savings. Some individuals even result to selling the little property to raise funds. The downside to bootstrapping is slow growth and serious financial constraints.
Borrow From Friends and Family
Many entrepreneur source startup funding from family members. They add to their savings by borrowing from friends and family.
Make sure your business model is sound and practical. Although your family is sympathetic to your cause don’t take them for granted.


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