Five Sources of Funds to Finance a Startup Business

Starting a new business requires money depending on the type of business. Some business requires small capital while others requires larger capital to start and grow such business.

It’s usually recommended to start small and grow big in the future. There are people with the desire to start their businesses but are troubled with how to raise money to start their businesses.

There are about five sources of finance to consider when seeking money to start or launch a new business. They are:

1. Savings: People can start a business with their money or savings. In this case, if someone wishes to start a business but doesn’t have money to pursue the business goals, such a person should get a job to earn and save money till there is a guarantee of substantial savings to launch a business. Savings are a source of funding especially when other sources are not available. Get a job, earn and save to launch the business.

2. Family & Friends: Those who have family and friends who are financially buoyant can approach them with their business ideas and seek support. Relatives and friends usually provide funds to support their own in ways they can. This source of financing is not available for everyone due to different reasons but those that can get startup funding from family and friends could be lucky if they give it a try by sharing their business idea with those close to them and requesting support.

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3. Angel Investor: This is another source of business funding available for startup founders. One may not be related to the Angel investors before they can be moved to invest in them. Angel investors are business-oriented and to win their hearts or go home with their money, it is required that the business idea must be bankable, profitable, problem-solving, scalable and can give the Angel Investor profit in the shortest period known as an exit.

4. Grants & Loans: Securing grants from the government, NGOs, and Corporate bodies are ways of raising funds for a business. To win a grant requires lots of work and the person seeking the grant will need to search for available grants close to him or her. Getting loans from financial institutions, lenders and government is another way of raising money to start a business or grow an existing business. The loan is not free, unlike grants. The person seeking a loan will need to provide security for the loan, pay interest and also repay the loan or risk legal issues depending on the terms of the loan.

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5. Venture Capitalist (VC): This is another possible way of raising money for a business. Venture Capitalists are people with funds and seeking a good business to invest in in exchange for equity and part ownership of the business. Venture Capitalists sometimes provide the funds, network and advice role to enable the business to succeed.

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