8 Methods to Get Funding for Your Business

One of the most essential parts of the entrepreneurial journey is the need for funding. Whether you're launching a new business or you need to grow your current business, the need for capital is always there. There are many methods to obtain funds, and it all depends on your needs, type of business, and the length of the investment. However, finding the right lender for your business is essential for growth. Many small businesses fail because they don't have enough capital to stay afloat. The following list will help you find the right funding for your business:

1. Self-funding or Bootstrapping

Bootstrapping your startup is a great way to begin your entrepreneurial journey. It’s the best means to make sure the foundations of your business are set up according to your ideals and vision. Being your own startup’s first backer also shows that you truly trust your product/service, which makes it easier to onboard outside investors in the future as it becomes a relatively low-risk investment for them

2. Angel Investors

High-net worth individuals with an interest in investing in startups are known as angel investors. Since an angel puts in their own money to invest, they typically look for a higher rate of return than bank or government loans, and might take an equity percentage as well. Therefore, it is imperative to realise how much risk you and your business are ready to take on before raising thousands of dollars of outside investment. Although, having an experienced investor on board can be quite beneficial as they can help coming up with crafty solutions to some of the issues being faced by you, and even connect you with the right people to help grow your business

3. Bank Loans

Bank loans are a convenient and credible way of getting money for your business. They charge a steady rate of interest which is in line with their risk analysis of your business, hence the exact number would change from bank to bank. Although, banks are extremely careful about lending to small businesses as they prefer to look for secure businesses with stable finances and a high-potential of successfully completing the loan term

4. Crowdfunding Platforms

Online crowdfunding portals help raise funds for various social causes, disaster relief efforts, charities, etc. and the same concept has been applied to small businesses, especially those promoting social or cultural causes. The last few years have seen the emergence of many credible crowdfunding platforms like SeedInvest, Wefunder, Microventures, etc. that help introduce entrepreneurs to small and angel investors. These platforms are mostly used by people who are in the early stages of developing their product or initial line of production

5. Incubator or Accelerators

Startup incubators and accelerators are programs where entrepreneurs can develop their businesses/ideas while receiving mentorship and help with resources. Usually, these programs lead up to a “pitch day” where all entrepreneurs pitch their business to a group of investors, hoping to secure funding from them. These programs are available all around the world and are a great way for startups to compete with each other and gather relevant data about themselves before scaling their operations

6. Government Grants

Governments around the world have schemes/programs that provide grants and loans to startups and small businesses, especially ones that work for the betterment of the country and its citizens directly. These grants can be used for expanding operations, conducting research and development, hiring experienced employees, etc.

7. Small Business Credit Cards

Banks and credit card issuers provide small business credit cards that come with special benefits like cashback rewards, airline mileage points, discounts on specific brands, etc. The interest rate for these can be quite high so it makes sense to use them only if your expenses aren’t too high

8. Peer-to-Peer Lending

Peer-to-peer lending is a type of borrowing where no middlemen are involved. Lenders set their own interest rates and lend money to borrowers as investment, who can then use it for their startup. The interest rates in these situations are usually higher than banks. With the emergence of cryptocurrency and blockchain technology, peer-to-peer lending has taken on a new form, with the process becoming easier to conduct than ever before

While these may be the most popular methods of getting a business loan, they’re not the only ones. What you have to keep in mind is that it is important to analyze what are the exact needs of your business before taking on a business loan of any kind. Some factors that you can consider while making this decision are:

• What is the interest rate and does it change overtime?
• What are some added costs associated with the loan (underwriting fee, administration fee, etc.)?
• Under what circumstances can the lender call a default on the loan?
• Is there any collateral required?
• Are there any limits to how the loan amount can be spent?
• Is there a penalty associated with pre-paying the loan?