One of the most efficient ways of financing a business is bootstrapping. If you don’t know what bootstrapping is, it’s using your own money from your pocket to finance your business directly. It has a lot of advantages, like not having to take out business loans, look for investors, etc.
However, as we all know, not everybody has the financial capacity to do that. Building a startup is a huge financial decision, not to mention very risky. Luckily for us, there are several ways to look for financing other than bootstrapping, and one of them is looking for investors. But what type of investors are out there, and how can they help us?
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Banks
Let’s get the elephant out of the room here. Banks can also be seen as investors. A bank will want a detailed business plan and projections for the coming years once your business takes off. It will also require you to present a business proposal showing the products and services you will be offering and the goals you will achieve shortly.
That said, when they deem your business idea worth investing in, they will provide different kinds of loans you can use to finance your startup. There are different kinds of loan programs that you can subscribe to, like microloan programs, 504 loan programs, 7(a) loan programs, etc.
However, knowing that these loans must be repaid before the loan matures is essential. Also, they are offered in any branch in any state of the bank you took the loan from, whether it’s in Florida or Cali.
However, if you want an easier time, you can opt for alternative lenders that offer the same programs online. They are much more convenient since you can access them anywhere with an internet connection. So whether you’re looking for an Illinois business loan or a personal loan New Orleans, they are accessible.
Angel Investors
Angel investors are high net-worth individuals who are rich enough to offer financial help to entrepreneurs looking to build a startup or even just a business idea that is introduced to them. Usually, angel investors will directly give you money in exchange for equity.
However, they are also known to give out loans and offer personal insights and knowledge to help the startup grow. Also, Serieswiggers Venture Beat is maybe the ideal alternative for new businesses if any investor wants to receive funding from a venture capital organization. Some will even give out properties to build a warehouse or a building floor to build an office for your business. They are called angels because they offer much for the startup but expect little in return.
Peer-to-Peer Lending
If you’re more familiar with borrowing, you might prefer this one. Although we’re talking exclusively about investors here, this one is more of a platform that helps you find investors quickly. This platform aims to make investing easier for entrepreneurs and investors without the need for a third party.
However, since we’re talking about lending here, your credit score is still a huge factor in whether you’ll be given access to an investor or not or whether the investor will accept your loan proposal.
Venture Capitalists
Venture capitalists are groups of professional financial managers investing their pooled money in startups or early-stage companies looking to score a huge return on investment by selling their stocks. Venture capitalists invest millions into startups and companies.
Usually, venture capitalists swoop in after an angel invests in a startup after it has proven profitable. However, most venture capitalists nowadays are more interested in startups and companies specializing in technology.
Personal Investors
This one is more familiar and close to heart. Essentially, personal investors are one or a group of your family members and friends willing to help you start a business. It might seem harmless enough, but be wary about making this decision. Mixing family and business is a huge risk. Your business might be mixed with personal biases, family disputes, familial conflict, etc. Also, you risk your finances and your friends and family’s finances if the business doesn’t take off.
We have heard many horror stories about a family being in conflict because of money. Of course, there are success stories that we can hear from time to time, but they are few and far between. We’re not saying that you should not make this decision, but instead, make sure that you have a strong bond at first and make sure that family matters are far from the business itself.
Final Words
Starting a business is probably one of the riskiest things you can do. A startup needs a lot of resources, especially money, which is why it’s risky. Fortunately, there are many other ways you can finance a business, and one of them is investors. Finding investors is hard, but once you find one, make sure that they’re the right fit for your business.