Strategies for Funding Your New Business Venture

Entrepreneurship is on the rise. In recent years, unpredictable economic situations and financial downturns have pushed more ambitious people than ever before to explore their options for creating their own businesses and ventures from scratch. At the same time, the digital world is making it easier for professionals in virtually every industry to explore different money-making opportunities. These days, you can start a company of your own with very little initial investment, and only some basic business experience. The biggest challenge for many would-be business owners, is figuring out how they're going to fund their new venture. Here are some of the top options available, and what you need to consider when exploring each strategy.

Funding Yourself (Personal Investment)

Popular among those who don't want to have to consider giving some of their equity, shares, and control to other investors, self-funding is common in today's world. If you're starting a small business which doesn't require a lot of up-front investment, like an ecommerce store using the dropshipping model, you may be able to pay for initial expenses yourself. Investing money into your own business is often quicker and more convenient than applying for finance from a third party. It also means you can have more control over the growth of your company. However, if you don't have a lot of savings to work with, you might have to look to ways of increasing your available cash. For instance, you might consider taking out personal loans to help you with initial expenses, or to pay off some of your credit card debts so you have more disposable income. The key to success is considering the pros and cons of personal loans carefully before you dive in.

Support from Friends and Family Members

If you're limited when it comes to personal resources to help you launch your business, asking for help from loved ones can be an excellent strategy. Many baby boomers and older generations are now living mortgage-free on comfortable pensions, which could mean they have more resources available to help you out if you need extra cash. Borrowing from friends and family members can save you a lot of money in the long-term, as there usually aren't any fees or interest rates to worry about. However, you should be cautious with this strategy. If you're unable to pay back what you borrow, this could lead to strain in your relationships. It's important to be transparent with loved ones about when they can expect to see a return on their investment and keep the lines of communication open. Always let your friends and family members know if you're struggling to follow through on your promises.

Business and Professional Loans

Perhaps the most common way to find funding for a business, professional loans are specifically designed to help entrepreneurs and companies access extra financing. There are even loans available specifically for startups, which generally require less evidence about your previous earnings, making it easier to start from scratch. The problem with business and professional loans is they require you to appeal to risk averse building societies and banks, which may not want to invest in you if you don't have a great credit score and a fantastic business plan. You'll need to be able to demonstrate that you can afford to make repayments, and that you know how to make your company a success. Working with a professional financial advisor or accountant on a business plan with a robust cash flow forecast can help to improve your chances of successfully earning funding. However, you still may need to shop around to get the terms you want.

Partners and Investors

Another option, similar to acquiring a business loan, is to work with partners and investors who are willing to share their finances in exchange for a stake in your business. Although you'll still need to show a business plan to potential partners to convince them to invest in you, you might find it's easier to get funding this way than to apply for a traditional loan. Partners and investors can also offer help outside of financial funding, giving guidance and direction that could help you to grow your company faster. However, working with partners does mean you may need to compromise on some of the control you have over your business. If you want to maintain an ownership stake in your company and avoid taking every decision to a board of directors, then this strategy might not be right for you. You'll also need to ensure you evaluate your partners carefully before signing any contracts.

Grants and Business Funding

Finally, if you're lucky enough to be starting a business in a particular sector, or you belong to a specific group, then you may be able to apply for certain types of specialist grants and funding to assist you in achieving your entrepreneurial goals. There are grants out there for everything from minority business owners to companies who are helping governments to address specific problems with digital transformation and social mobility. Applying for grants can be a great way to access cash you don't need to pay back. However, getting a grant isn't easy. The application process is often very competitive, and you'll need to work hard to make a strong case for your business. Many entrepreneurs can spend months arguing their case, which makes it harder to rapidly take a new idea to market.

Finding the Right Funding Solution

As the entrepreneur lifestyle becomes more common and appealing, particularly to younger generations, top business leaders have discovered various new forms of funding have begun to emerge in the modern market. The options above represent just some of the ways you might be able to finance your new venture. Each solution comes with its own pros and cons to consider, so there's no one-size-fits-all strategy that's guaranteed to be effective for every company. The best way to ensure you're starting your business on the right footing is to do your research and consider all your options carefully.