5 Sources of Funding for Budding Entrepreneurs
Small businesses, especially the ones with the most innovative ideas are falling off the grid within their first year because of finances. A look at the statistics is scary because banks aren’t financing the entrepreneurs with the big ideas because of poor credit and also because they lack collateral.
If banks aren’t the option for you now, you can consider the following options as you seek professional Toronto financial services to boost your business growth:
- Love money
This is the money you borrow from your closest connections – family and friends. Even though you will receive a one-off investment from your friends or family, that money goes a long way in launching or boosting your business’ success.
Unfortunately, it isn’t always easy to ask for love money. So, for your request to be considered, you should go about it with a promissory note that states the terms of repayment. In other cases, you may have to give out a percentage of your business as equity to the person lending you money. For equity, you’ll have to sign a risk-acknowledgment form. Again, the business may not go down as planned.
Keep in mind that if you can validate your product, then your relatives or friends will be willing to put in something for you.
Though this isn’t the most appealing way to raise funds for your business, you can get a significant amount of money from it. As a do-it-yourself financing strategy, you’ll have to make significant changes to your budget and also on operating expenses before you look for operating capital from outside. By being tight on yourself and using money smartly, you can run your business without debt or even having to give up your business equity.
- Venture capitalists and angel investors
In some part of the world, there is an individual with lots of money willing to give you money if you can’t raise enough money on your own. These are venture capitalists and angel investors who can spend millions on you just because of your business idea. There is a catch though, your business idea must be disruptive, and it should show a significant potential for growth.
Even though the venture capitalists and the angel investors have a lot of money, they still need to make money from their investments. Keep in mind that most venture capitalists look for technology-driven businesses.
- Business Incubators/ Accelerators
These are businesses that focus on high-tech business sectors and offer them support in different levels of development. In most cases, the incubators focus on job creation, hosting and sharing services and revitalization. So, they invite future business and allow them to share/ use their business premises so that the startups can develop and test their products cheaply before they begin mass production. Most business accelerator programs run for up to 2 years.
- Government funding
This is considered the low-hanging fruit and not so many people are aware of the existence of financial support services from the government. In most cases, entrepreneurs don’t know where to look for the government funds or the eligibility criteria.
In other cases, the government offers grants or subsidies and you don’t have to repay any amount. The only time the government asks for its money back is if you don’t use the money as in the terms of agreement.
Finally, you can try credit unions and P2P lenders when in need of money to start you business.