Securing the right funding for your business is very important: without the money to fund your start up costs, and cushion you until you establish a loyal group of repeat customers, or large contracts that meet your expenses, you’ll need a cushion of funds to cover your everyday operations.
There are various ways to attract the necessary funding, but not all may be suitable for your business. Here are three tips to help you get over the funding gap and start running your ideal business.
Business Development Loan
This is the most traditional source of funding: going to one of the major banks with your business plan to demonstrate that a loan given to you would be a safe investment, allowing you to set up a business that would let you repay the loan.
This is most suitable for a traditional business: while encouraged to explore new forms of business, a bank will gravitate to funding bricks and mortar shops, and new iterations of existing services, if only because they have more examples from which to assess if yours will be successful.
Less traditional businesses may wish to seek out investment from one or more ‘Angels’: serial investors looking to make a big investment in a business they feel a personal affinity for. This is not a source of money you can rely on: it relies on having the right network of connections, and the luck of you wanting to move on with your business plans at the same time as the right investor is looking for their next project.
If this does line up, be aware that Angel Investors do tend to favour a more hands on attitude than a bank. While this means you have access to their long experience, it also means you could find yourself losing authority over your own business. Make sure you have draw up a solid Shareholder Agreement that protects your position in the business.
Website like Kickstarter and IndieGoGo have made headlines in recent years for allowing creative entrepreneurs to raise big sums for their projects. This is something to consider but is the best fit for your business: crowdfunding needs to capture the imagination and create a community as it goes. It suits creative propositions: fashion, performance, unique retail ideas. If you have a more traditional business in mind it is probably safer to go elsewhere.
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.