Starting a company from scratch is now easier than ever, however, not having the money needed for your business endeavor can make things difficult. Luckily, there are several ways through which you can get the funds that you need, some of which are more traditional than others.
Get funding from the government
Those who need funds in order to start a company may take advantage of the start-up loans that are offered by the government. These are usually safer to use than ones offered by private companies due to the fact that have fewer fees that must be paid and come with a fixed interest rate.
The downside of start-up loans offered by the government is the fact that there is a lot of competition between entrepreneurs who need funds for their companies. The selection process is not strict, however, only the most promising companies are selected
When it comes to the actual duration of the loan, it is currently possible to repay the money over a period of 1 to 5 years, but this too may change.
Get funding from a private company or service
If you do not want to compete with the large number of entrepreneurs who are trying to get a start-up loan from the government, you may get one from one of the many private money-lending companies that offer their services both online and offline.
These companies usually offer variable interest rates, making them riskier, however, they are awarded more easily than the ones offered by the government. You will still have to have a good loan proposal and a solid business plan in order to get the funding that you need, but there won’t be as many individuals who compete for a limited number of loans.
Consider using a crowdfunding platform
Crowdfunding is one of the newer ways to finance a company. These platforms consist of thousands if not millions of users who are free to back-up/invest in any idea or company that they find attractive.
Getting the money that you need through a crowdfunding platform requires that you follow a different process than the one that you would when going to a private lending company or the government. You simply have to create an account, create a presentation page/video for your business idea, and to provide the potential funders with all the information that you think they will need in order to invest in your company.
You will also have to set a financial objective. The platform will then collect the funds from individuals who agree to fund you. If and when you reach this objective, the platform will release the funds to your account and you will be free to use them as you see fit.
Repayment and additional fees that you need to take into consideration
Depending on what type of funding you choose to focus on, keep in mind that you will be required to either repay the loan or give something back to the users who funded your business endeavor.
Governmental start-up loans have fixed interest rates, ones from private companies have variable ones, and users crowdfunding platforms will need to be updated on your progress and may request to see how you’ve spent their money. In some cases, they may require that you offer complete transparency.
Also take into consideration that some crowdfunding companies allow you to receive funding in exchange for discounts, products, or other materials. Once your idea is funded, you will be obligated to offer these items to your backers.
Overall, getting a start-up loan using a governmental program may a better choice than to go to a private company, if you are unsure of how fruitful your business endeavor will be. This is, in part, because a governmental agreement is safer than one with a business that only focuses on making a profit, but also as a result of the fact that there are fewer fees to pay.
On the other hand, start-up loans offered by companies may offer more flexibility in terms of how much money you can ask for, and also the length of the loan. When it comes to crowdfunding services, these can be extremely useful if your business idea is attractive and has a lot of value, and some platforms do not expect the money back, even if the company fails (the funders agree that they are taking a chance by funding your idea). The downside is that it may take a very long time to collect the money that you need.
Regardless of what type of start-up funding you choose, keep in mind that one of the most important things when it comes to getting a loan is figuring out how you will repay it. Each of the companies and services presented above has different rules and regulations that dictate how you will have to give the money bank.