A Comprehensive Analysis of Top Nine Sources of Capital To Kick Start Your Innovative Startup Organization

Written by: AnyRates Staff
2020

Running a startup is always a hard undertaking due to the lack of sufficient funds to meet the daily financial obligations. However, as a startup owner, you don’t have to see your company collapsing when you can source funds from various lending institutions that have consistently proven that they can help cash strapped companies to continue with their operations. Here are some multiple sources of financing that you can consider to push your business to the next level.

1. Personal Investments
If you want to have a successful business, you have to dig deep into your pockets and fund your business first before you can request funding from other parties. Traditionally, lending companies will give you money to run your company after evaluating what you have committed as the owner of the business. You can get some of your life savings and have your business rolling after which you will request for funds from other business lenders in the financial sector.

2. Friends and Family Members
Apart from personal investments, family members and friends form the closest group of people who can fund your startup business. You can be lucky to have family members who will voluntarily give you money for free so that you can push the operations of your organization. However, most of them will be ready to lend you money that you can return when your business is fully running. This form of funding is highly preferred because it is not tied to interest and some hard-to-meet financial obligations.

3. Angel Investors
Angel investors are experienced business leaders who have been in the industry for many years. They help startup companies to continue with their operations by investing a considerable amount of money in their activities. Most of them are retired company executives who can be considered as experts in a specific field of business. However, if you are sourcing funds from angel investors, you should be required to lose some management decisions in your company as they may demand to say in the decision-making process.

4. Venture Capital
If your startup operates explicitly in biotechnology, communication, and financial technology industry, you can source funds from venture capitalists. These lenders specialize in offering funds to high return companies that are technology-based. They will expect huge returns on their investments after the company establishes its operations. Unlike angel investors, venture capitalists do not demand management control but demand equity on the business. As such, you must be prepared to co-own your business. This is a common form of financial arrangement in the modern business environment.

5. Business Incubators
Business incubators concentrate on providing funding to startup companies that are in different stages of their development. Incubators may not necessarily provide financial assistance to the operations of the company. Some of them may offer logistical services, production facilities, and even technical services. They are essential in helping a company to overcome various challenges for a period that may last up to two years. Incubators also demand some equity form the business because the company does not have finances to cater to the incubation services rendered.

6. Government Subsidies
Governments, whether state or federal, have some structured financing programs where they fund startup ideas through grants or subsidies. These are the best sources of funds for community or non-profit business organizations. However, it is essential to note that the government has been supporting small and innovative business ideas that offer employment opportunities to educated youths and vulnerable communities. This type of funding does not attract interests, but you will be required to return the funds with some administrative costs.

7. Bank Loans
Bank loans are the most common sources of finance that many startup businesses have been using for many years. It is common knowledge that banks lend money to small companies to sustain and improve their operations. Bank loans are not the best as they attract huge interests on returns. Therefore, before choosing any bank loan, you need to do some shopping so that you can determine what works for your company. Always consider low-interest loans that the company will be able to handle in the short and long term.

8. Crowdfunding
This is a new form of business financing that is currently helping startup ideas to have the necessary finances for implementation. It involves borrowing funds from the internet, where people from different parts of the world contribute as much as they can or as little as $10. Crowdfunding is a new source of fund for startups and is largely supported by the availability of internet. It is essential to note that people who contribute through crowdfunding do not expect any return from the company.

9. Business Lines of Credit
A business line of credit is an innovative source of fund that is considered as a hybrid between the traditional business loan and credit card. The lender has a maximum limit that a company can borrow and there are no restrictions on how these funds can be used in the operations of the company. It is a friendly source of funds that companies can use to supplement a decline in cash flows. Startup organizations can use a business line of credit to build their credit reputation in the market.

As you can see, there are many sources of funds that you can use to kick start or stabilize the operations of your startup business. Each method of financing has its own merits and demerits. Therefore, you need to make sure that you consider a financing strategy that will not complicate the finances of your small company. The best source of financing should be flexible during repayment, affordable, and should not interfere with the internal management of your business.


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