Regardless of the potentiality of an
idea to generate immense business opportunity, funding a new venture
remains an uphill task for the entrepreneurs. It may be a difficult
job to arrange a steady line of cash to start the venture, but it is
nevertheless essential to move on to the next level in setting it up.
Entrepreneurs, who are smart in their job and have planned well, are
less likely to incur debt during the initial stages of their start-up
venture and ask for debt
help to resolve their business liabilities. There is no dearth of
finances for an entrepreneur, if one has the required 3innovation and
shrewdness in his approach.
So, entrepreneurs may take advantage of
the available finances to fund their venture and raise their business
to the next level.
Business funding options
Here are the most popular means to get
the required finances to float a new business:
-
Lending institutions -
Generally, lending institutions like banks, small business loan
providers, credit unions, etc are the ones that can be approached
for a business loan. This is one of the most trusted options to
receive funding for a business. These lending institutions primarily
approve loans for those businesses that have been functional for at
least 2 years.
However, since these are secured
loans, borrowers are required to keep an asset as collateral.
Moreover, Small Business Administration or SBA loan is a great
option to get the necessary funding to start a new business.
-
Self-sustenance - This is
probably the most basic source of financing a start-up venture. In
most cases, budding entrepreneurs arrange most part of the initial
capital on their own. This is technically known as "bootstrapping".
In its most basic term, bootstrapping refers to the utilization of
all available options to collect funds that will help into push a
new business to the next growth stage.
Therefore, one can use whatever
savings one has got or take out a fresh mortgage loan (known as
refinance or home equity loan) to invest in the business. Moreover,
one can also rely on credit cards for funds, but it can be a risky
affair since irresponsible use of credit cards may invite debt
problems.
-
Acquaintances - Apart from
the above 2 funding options, several emerging entrepreneurs bank
upon their relatives and other well-off contacts for business funds.
However, it would be best to get everything in written to prevent
any bad feelings in the future. This is because taking out loans
from relatives and friends is an informal method of obtaining a
loan, therefore, a documented agreement will help in solving any
loan repayment issue later on.
-
Allowance - Entrepreneurs
planning to start a technology business can apply for Small Business
Innovation Research (SBIR) funds. This is a federal government
initiative to anoint and promote budding entrepreneurs who have
promising business potential. Under this funding program, some
organizations invest a part of their company's yearly budget on
start-up ventures and share the profits incurred therein with the
actual owner.
Moreover, the government has initiated
some loans for women entrepreneurs and entrepreneurs hailing from the
minority communities to uplift them and make them an integral part of
the economy's growth engine.