How to get Funding for Your Startup by@tanya95

How to get Funding for Your Startup

Different funding options might be more appropriate depending on what stage your startup is in and what its specific needs may be. What a startup spends their funding on will greatly differ from company to company. For remote and tech focused startups, it may be that connectivity between teams and employees is key, meaning the company needs to spend more on VoIP phone systems than on offices. Crowdfunding as a way of funding startups has grown in popularity in recent years. Incubators and accelerators are designed for startup companies and offer support through networking, mentorship and capital.
image
Amelia HackerNoon profile picture

Amelia

Full Stack Software Developer, Crypto Blogger

youtube social icon

If you are a startup looking for funding, it can be challenging to know where to begin with all the options available. Different funding options might be more appropriate depending on what stage your startup is in and what its specific needs may be. Also, what a startup spends their funding on will greatly differ from company to company.

For example, for remote and tech focused startups, it may be that connectivity between teams and employees is key, meaning the company needs to spend more on Voice Over Internet Protocols Phone Systems than on offices, whereas in other cases, a startup may need to spend big on their office space because of the nature of their business.

1. Loans

There are many different loans available if you are looking to get funding for your startup, from the more general to specific ones focusing on other industries or even to give a foot in the door to certain minority groups.

Depending on the nature of your business, you could take out a personal loan or a business loan. These loans could be small amounts or even up to £50,000 or more in some cases. You can use these loans to start a business, grow or expand or repair it after any damage. 

If you have a strong financial profile (i.e. you have a good credit score and credit history), it is likely that you could be approved for a loan with favourable terms such as a quicker approval time and a lower interest rate. 

Some lenders may have specific restrictions when it comes to the purpose of the loan so always make sure to check this beforehand. 

If you are unable to qualify for a standard business loan, you could also consider a microloan. This is a type of capital which could help business founders build their credit score so that they open themselves up to more funding options in the future.

2. Business grants

Business grants are investments given to businesses by either a government, non-profit entity or corporation. These are usually mission-driven so in order to qualify, your business will need to demonstrate particular goals or values that are aligned with that of the lending body. Unlike loans, grants do not need to be repaid and do not accrue interest. They are considered to be a gift.

3. Private investment 

For companies that are growing at a rapid rate, it might be best to explore the option of venture capitalists. This is a high-risk, high-reward option. However, it is important to remember that it is not possible to borrow money instantly when seeking private investment and there will be various stages companies and their founders will need to go through before any funding is approved. It can take months before the funding reaches the company needing it.

If the company succeeds, the investors will receive a high return on their investment and the payout could be substantial. However, if the company fails, the investors will not see any return on the money that they have contributed.

The ideal scenario for an investor is that the company they invest in either goes public or gets acquired; if this is the case, it means their investments will be paid back, plus interest.

Private equity also involves the investors having some control over the business activities; they have the option to sit on the board or act as advisors. It is in their best interest for the company to succeed so they will do what they can to help the business thrive.

4. Crowdfunding

Crowdfunding as a way of funding startups has grown in popularity in recent years. Small businesses can use this method to raise money online in exchange for company equity, rewards, debt, or in some cases, nothing. Although it can be a good way to get quick access to funds, it is not always preferable in terms of what they have to give up. It requires full transparency about the progression of the company and also may involve giving up some equity.

5. Incubators and accelerators

Incubators and accelerators are designed for startup companies and offer support through networking, mentorship and capital. Incubators help startups in the initial stages focusing on building a business. This includes things such as developing a viable business plan and establishing a business name and concept. Accelerators, on the other hand, are for companies that already have a minimum viable product and focuses on growth through mentorship, funding and networking.

react to story with heart
react to story with light
react to story with boat
react to story with money

Related Stories

L O A D I N G
. . . comments & more!