If you are looking at raising money for your new venture, there are a few ways for you to get that done. New venture funding seems to be a very difficult proposition for most people, but these are people who don’t know that they have a lot of options opened out to them. At the same time, not all kinds of new venture funding will work for all kinds of people. Hence, if you are looking for funding your new venture as well, you need to see what fits in with your specific requirements. Here we shall see a number of ways in which this can be done.
Bootstrapping
Bootstrapping is an age old practice of funding new business ventures which is practiced even today. Quite simply put, it is the method of funding businesses with whatever cash is available on hand. This includes cash in the bank balance and whatever other liquidity is accessible at the moment. This may be a good (and safe) way to fund a new venture, because you don’t have to repay anything to anyone, but at the same time, this may not be enough for your needs. For small businesses, you might have the required amount of cash. However, if you are planning to go big, bootstrapping won’t work. Also, if you plan to expand your business anytime soon, bootstrapping might not cover for what you have in mind. That is the reason you need to begin looking for other methods.
Personal Loans
Many financial institutions (almost all of them) provide personal loans for new ventures. You have to submit a business proposal and show that your credit record is good and you stand a chance to get a personal loan. Different financial institutions have different requirements here and their interest rates for repayment are also different. So, you need to deal with them differently. Some entrepreneurs also go on a shopping spree to see which financial institution will best provide their new venture funding.
Personal loans are safe in the respect that they are usually small sums of money, the repayments are done on a regular basis and you don’t need to spend too much on them. You can get them easily. However, most financial institutions will shy away from giving a large personal loan to someone whom they don’t trust with their credit. For larger sums of money, you will need to have some excellent convincing skills and documents to prove those.
Credit Cards
This is another way for small businesses to plan their new venture funding. They simply use their credit cards to pay for their requirements. Some o them might even apply for a business credit card in advance and pay for things such as their employee salaries through the cards. This seems to be a very easy way to pay for things, but it is also the most horrendous, especially considering that credit cards have the highest interest rates of any other method. The repayment you make on them could be enormous and go on for years. If you are able to make only minimum payments at first, it means that everything will snowball into a huge sum later on, and that would be too difficult to repay.
Factoring
This could be one way. It simply means you sell your products and services at slightly lower costs so that you get more buyers. This helps raise some cash which you can use for your new venture funding. It sounds simple, but this isn’t someone everyone can do. First of all, you need to have something to sell. Secondly, there’s always a breakeven point you need even when you are factoring your costs into the selling price. This doesn’t work profitably all the time.
Approaching Friends and Family
You might have to do this as well. You might have to speak to people who know and trust you about the new venture you are planning to start and ask them for capital. This can be done in various ways. You can permit them to purchase stock or even go on and give them an initial public offering. But the simplest way to do it is to just ask for a loan and repay that on time. The best part here is the trust factor. Your family and friends know you for a long time and they will be somewhat more assured about the repayment. They might also have moral obligations with you for which they might fund your new venture. But be prepared to discuss some awkward questions with your family and friends till you pay all the money back.
Angel Investors
Among the new-fangled ways to get new venture funding, this is probably the most recent. Angels are people who have a lot of money and want to invest in something that would be profitable for them. They would like people who have brilliant business ideas so that they could invest in their ventures and hope for some profit down the line. These people don’t ask many questions—if they like a particular business idea, they will go ahead and invest. They are usually prepared to wait anywhere between 5 and 7 years before the business starts blossoming and the money starts coming in.
Venture Capitalists
Unlike angel investors, venture capitalists work in groups most of the time. They may not have their own money to invest, but they have a source from where to obtain the money. In this sense, these are companies that help you with your new venture funding needs. Venture capitalists will be connected with your business in a better way. They will be interested in how your business is faring and they might also have half-yearly or quarterly sessions, employ people and give your general tips and advice on how you can increase the profitability of your new venture.
Both angel investors and venture capitalists work for big stakes. If you have a business concept that will likely need a huge investment, you might want to do some research on these types of new venture funding and see if any one of them might work to your advantage.