Startups, established or healthy business, all needs funding to make sure that their operation is not interrupted at any point of time. Therefore, as a business owner at some point of time you will need to ensure you have a steady flow of funds for capital as well as business growth.
While taking out a business loan seems to be the most effective and common approach by the business owners, all owners may not be as lucky. It may be that the credit is low or the prevailing rate of interest is too high which may compel you to look for other alternative sources, be it a different line of credit or any online source such as Liberty Lending US.
Ideally, when it comes to choose a suitable financing option it depends on a few specific factors such as:
- The kind of business you have
- The age of your business
- The location of your business
- Itsperformance and future prospects
- The market opportunities
- Your team and lots more.
All these are very important factors that will enable you to tailor your funding need and search. You will also be able to follow the right approach so that you do not waste valuable time in looking for the best funding option but end up making the wrong choice.
The general realities
To start with your search, you must first understand the overallrealisms of getting funded. Therefore, it is important that you run a quick reality check on your business, the funding options and even the myths that surround business funding. Ideally, a lot will depend upon the specific details of your business. It is also important for you to remember at this point that, realities go case by case and depends up on factors such as:
- The growth
- The stage
- The resourcesand several other factors.
For example, an ongoing business may have an easy access to a standard business loanfrom a traditional commercial bank but for a startup it may not be that easy. On the other hand, a high-tech startup having a high prospect of growth and profit may have easy access to outside investment funding but that may not be available for even the most established and stable business that shows slow growth.
If you are a small business owner, you will be better off if you know about the challenges that surrounds funding such small businesses. Especially, the financing myths that surrounds the small businesses pose a significant challenge to the owners who do not know the real picture.
Therefore, before you start exploring all the different available options to fund your business, explore some of the most popular small business funding myths so that you can get them out of your way when you look for a suitable funding source. This way, you will not be discouraged easily and know the better way to go ahead.
- The first myth is that it is only the venture capital that supposed to be the growing opportunity for funding a small business. The fact is that venture capital financing is hard to find as it is very rare. It is available to only a few companies that have high-growth opportunities and have a highly efficient management team. Do not get confused with the terms “venture capital” because this phrase is completely different from the phrases like “outside investors” or “angel investors.”
- The second myth is that bank loans are the best and the most suitable option for funding a new business. Well, the fact is that banks actually do not finance any business startup or any business that do not have a proper business plan or prospect.
- The third myth is that business plans sell investors while the reality is, they do not actually. Even a well-written, strategic and a very convincing business plan or pitch may not help you find the right investors. This is because the investors are not interested in your plan or in the details. Instead they are more interested in your business, in its current and future states.
However, that does not mean you should not have a business plan but more than that you should have a proper team in place so that you can make proper and desired progress to validate your business plan and idea. This is what the investors actually look for, ground reality.
Sources to look for
There are different sources that you should look for funding your business. However, you must make sure that the ultimate source that you choose for funding your business matches the need of your business. You must consider the kind or amount of money that you need as well.
There are actually six different types of funding available for a business. These are:
- Venture capital: This type of funding a business is just, well a business. They are business people and invest money of other people. They carry a significant amount of professional risk and therefore fund selective businesses that have both product and market opportunity and a proven management.
- Angel investment: This is a much more common option than venture capital and are available to startups much easily as compared to venture capital. They are actually a group or an individual investing their own money in other’s businesses.
- Commercial lenders: Though government prevents banks to fund startups because the society in general does not want the money of the depositors to be invested in risky businesses, this is the best source to fund your business, provided you qualify for it.
- SBA: You can get in touch with the SBA or The Small Business Administration that will guarantee loans to even small businesses and startups. Though they do not make any loan directly, it is their guarantee that will encourage the banks to fund your business.
There are also a few other sources that you can look out as well. The accounts receivable specialist is a good source to borrow against your account receivables, factoring can also purchase obligations and of course there are your friends and family members as well.