A business must always strive to grow, but circumstances like the coronavirus pandemic hinder many companies from earning. Startup businesses even had it worse, especially the ones that just started right before the pandemic.
Luckily, the world is slowly starting to get back on track, and many businesses are beginning to thrive again. Starting a business, especially at this time, can still be pretty hard. The good news is that startup businesses can get financing options so that they can have additional funding.
What are these financing options? We listed them all down for you. Read on below to learn more.
Financing Options for Startups
There are many types of financing options available, which is why you should consider knowing more about them. This way, you can learn what option works best for you.
Bootstrapping, also known as self-funding, is a financing option that allows you to use your personal finances to support your business.
The main advantage of this option is that you have 100% control over the company because the funding came from your pocket. The only thing that you have to worry about is that your funds might be limited.
2. Community Development Financial Institutions (CDFI)
CDFIs are private financial institutions that primarily provide lending and funding services for businesses in economically challenged communities.
Like any other lender, CDFIs rely on credit scores to determine if they should grant financing to an applicant or not. However, they’re less strict and more flexible when lending money instead of commercial banks.
3. Commercial Banks
Most banks employ low-risk, high-profit lending policies. These policies tend to favor bigger businesses and don’t do much for startups.
The reason for this is because startups are not considered ideal candidates for bank loans since they’re unknown. You must provide an excellent business plan if you want to get a business loan from most banks.
4. Government Grants
When the pandemic happened, many government agencies played a huge role in supporting businesses in many industries.
Since the world is slowly coming back to normal, governments are starting to go back to their old ways. Because of this, it can be pretty hard to get grants. You can still get them, but the qualifications of getting a grant are often stringent and competitive—the application process is also pretty long.
5. Angel Investors
As the name implies, angel investors are wealthy individuals or retired business executives who invest in small businesses. Aside from finances, they also contribute to the company by passing their knowledge of running a business.
Not only that, but they also recommend the business to their other business contacts. The investment is generally a way to get involved in supervising the management of the company.
6. Venture Capital
Venture capitalists typically seek companies with high potential for growth that they can invest in. Most startup companies with a solid business plan are of interest to venture capitalists, but they typically prefer businesses in technology and communications.
7. Equity Crowdfunding
As the name implies, crowdfunding is raising funds for a business through the public. In essence, the money is minimal investments—the public investors are then given a proportionate share of equity in the company.
Crowdfunding investments are usually low, so many investors are needed to achieve the required amount of capital for startups.
8. Invoice Factoring
Invoice factoring refers to selling account receivables at a discount in exchange for immediate money. Since it eliminates the long waiting time, you can use the money as capital for your startup.
A startup business must always have financial resources to have greater chances of success. The information outlined above are options that you can choose from. All you have to do is to know what works best for your business.
If you need immediate finances for your startup business, invoice factoring is the best option. Porter Capital provides invoice factoring services so that you can sooner start your business. We believe that all businesses deserve to grow, which is why we’re here to help jumpstart them if needed. Contact us today to learn more!