When financing a new business, it is not advisable to put all your eggs in one basket. Do not also rely on banks as your sole source of funds and showing that you have diverse financial alternatives shows that you are a proactive entrepreneur.
Here are few ways to get finance for your business
- Personal investment: When starting a business, you should be your own priority. Your first investor should be YOURSELF. You should have a particular amount saved or collateral on your assets. This shows other investors that you are dedicated and committed to your business
- Help from loved ones: This is the money loaned by a loved one- parents, family, friends or spouse. When borrowing from a loved one, you should know that family and friends do not have much capital and a business relationship should not be taken lightly.
- Venture capital: Venture capitalists take an equity position in the company to help it carry out a promising but higher risk project. This involves giving up some ownership or equity in your business to an external party. Venture capitalists also expect a healthy return on their investment, often generated when the business starts selling shares to the public. Be sure to look for investors who bring relevant experience and knowledge to your business.
Venture capital is not for every entrepreneur.
- Angel investestors: Angels investors are wealthy individuals or retired company executives who invest directly in small firms owned by others. They are often leaders in their own field who not only contribute their experience and network of contacts but also their technical and/or management knowledge. Angels tend to finance the early stages of the business with investments in the order of $25,000 to $100,000. Institutional venture capitalists prefer larger investments, in the order of $1,000,000.
In exchange for risking their money, they reserve the right to supervise the company’s management practices. In concrete terms, this often involves a seat on the board of directors and an assurance of transparency.
- Accelerators: Accelerators which are also known as business incubators focus on the high-tech sector by providing support for new businesses in various stages of development. However, there are also local economic development incubators, which are focused on areas such as job creation, revitalization and hosting and sharing services.
Businesses that receive this kind of support often operate within state-of-the-art sectors such as biotechnology, information technology, multimedia, or industrial technology