Finding financing for a start-up or business expansion can be challenging. Indeed, some start-ups fail to take off while businesses with huge potential come down crumbling for lack of enough financing. So, what are the best business financing options?
Crowdfunding is one of the relatively new methods of raising money, especially for start-ups. It involves presenting your business idea and asking people on the internet to fund it.
If they like the idea, they will invest their money and expect to get some reward once the enterprise starts making profits. To win people’s hearts and make them risk their money on your venture, it is important to ensure that your project is well-researched and properly presented.
If you have a good start-up with huge potential, another good funding option is looking for angel investors.
These are people who are not your friends or relatives but are willing to put their money in your business to help it grow and get some returns in the end. So, where do you get angel investors who are willing to part with millions of dollars to help your business grow?
- Use online platforms such as Gust and Angel Investment Network.
- Pitch tent in investment events such as the Startup Grind.
Self-funding is really good if you can do it. This method gives you the confidence and control over your business, knowing that no bank or creditor will come knocking on the door to demand repayment.
Besides, your work does not get stuck in bureaucracies since you can pay staff promptly and clear bill without seeking additional approvals.
However, self-funding implies that you might not have investors to help you raise additional finances in the future.
This is a method of financing where a company sells its receivables, especially invoices, at a discount in order to receive cash up-front.
It is recommended when a business has poor credit sore and is unable to secure funds from financial institutions such as banks. The method is also considered when a company needs to pay expenses, such as wages and utility bills, yet the invoices have not been cleared.
Although factoring helps you to access cash promptly, it comes at a cost. Most factoring companies will charge 2% of the total value of the invoice.
When you decide to start a manufacturing enterprise as reflected here, it is crucial to have a clear plan for financing its operations. Remember always to compare the different methods of financing to understand their pros and cons.