Starting a business sounds very thrilling; however, it's often the case that it requires enough financing to get airborne. Knowing your financing options goes a long way   toward making sure your startup has all the resources it needs to succeed. The

following article discusses some of the best options available for entrepreneurs in using funding for a best-fit business venture.

Why Fundraising Is a Must Requirement for Any New Company

Financing forms the bloodstream where initial costs, as seen in buying equipment and hiring employees, become investment in marketing. Working capital also

becomes required to run the business until an appropriate and feasible return on

investment is realized. Further awareness of the possibilities will enable you to plan strategically in the way resources are used and then encourage long-term success.

Common Startup Finance Options

Bootstrapping (Self-Financing): Bootstrapping is when you begin through personal  savings from your pocket. Thus, you have all the control and no debts with equity to   give away.

Pros:

•    Own the business.

•     No debt.

•    Higher degree of flexibility to choose decisions.

Cons:

•    Great personal financial risk.

•    Growth might be limited through a lack of capital.

Friends and Family

Most of the founders get the funds from their friends and families. Funding in such a manner is speedy and less formal than acquiring loans.

Pros:

•    Less stringent terms.

•    Quick access to cash.

•    No scope of damaging personal relationships.

This plan has very less probabilities of getting misunderstood due to lack of a formal agreement.

Bank Loans

Since most traditional banks provide ample funding to startup ventures through the various products like term loans and lines of credits.

Pros:

•    Repayment schedule would be fixed.

•    Chances of low interest rates.

Cons:

•    Qualification standards must be very strict.

•    Collateral is usually required.

SBA Loans:

SBA loans are fully guaranteed by the federal government and they offer attractive terms, more favorable interest rates and longer repayment periods.

Pros:

•    Lower down payment requirements.

•    More accessible to small businesses.

Cons:

•     Long process.

·

Angel Investors

Angel investors invest their personal finances in the companies in return for an equity share or convertible debt. They usually provide sector-specific knowledge.

Pros:

•    No repayment obligation and availability of funds.

•    Mentorship from experienced investors.

Cons:

•    Loss of control over ownership on specific issues.

•     Return on investment is more than the average.

Venture Capital (VC)

Venture capital is capital from firms that specialize in capital for high-growth start-ups.

Pros:

•    Strong financing for turbo-boosted growth.

•    Access to network of contacts.

Cons:

•     Reducing equity and losing control.

•     Intense pressure to raise funds.

Crowd funding

Platforms allow an entrepreneur the opportunity to generate small money from

several individuals. In most instances, these platforms would utilize some of the sites like Kick starter.

Pros:

The basic interest generated by the public shows that your business idea is feasible.

•     Definitely, no loan payback.

Cons:

•     It is very dependent on a sound marketing strategy.

•    Campaign management is also very time-consuming.

Grants and Competitions

Several organizations conduct grants or run competitions offering fund rising to startups with zero repayment liability.

Pros:

•     No repayment liability.

•    Supports specific kinds of businesses.

Cons:

•    Very competitive.

•    Applications involve many procedures.

Selecting the Right Funding Source

Some Relevant Comparisons relating to some aspects which could indicate that one funding source is better than others, for example:

Business Model: Which type of funding source more easily aligns with your goals?    Stage of Business: At times, one option is simply more appropriate for the business. Financial Requirements: How much and when do you require it?

Control and Ownership: How much control are you willing to lose in order to receive funding?

Conclusion

Access to funding always determines the fate of your startup and how well it is taken care of. Self-funding into angel investors; each has its strengths and weaknesses.     The real needs of your business place it in the right method of financing, which

ensures growth and survival. With good choices of funding source, you put your startup in a high position to succeed in any given competitive market.

FAQs

Best financing option for a startup?

The best choice of an option for you will depend majorly on your business model,   financial needs, and willingness to give up equity or take on debt. Self-funding or a

bank loan is best suited for those who require full control. High-growth startups might better work out for angel investors or venture capital.

How do I have a high chance of getting a loan?

If you have a good business plan, attain a good credit score, and offer some form of collateral more often than not, your chances of getting that loan go up significantly.

Are Grants awarded to all types of startups?

Not at all; most grants target specific industries or demographics. Research grants in your field to find relevant opportunities.