All big and unique businesses once started off as being an idea. It takes a combination of many inputs and efforts to turn a business idea into a reality and then to take that reality to anything near it’s true potential. One of the critical inputs that almost all business ideas end up requiring at each step of growth, is funding.
There are many ways in which a business can be funded at various stages of its growth and development. In today’s market, some ways are more used for practical reasons. About funding new business ideas, we share three funding systems that the market tends to lean towards most often. So read on to know what’s working well and why, to see if it could work for you too!
1. Bootstrapping followed by Alternate Funding
This is the most common combination of funding that is seen in new small businesses today when industry is kept as a bar in the measurements.
Bootstrapping is when an individual or a team invests a part of their personal funds to start a new business. Alternate funding is non-bank or non-institutional funding for businesses. It is provided by alternate direct lenders for businesses. These loans tend to be higher-risk. They also have simpler application processes. Thus, they are more costly. Most alternate funding options require businesses to be operating with revenue for at least 6 months. Bootstrapping is the most common initial funding source for new businesses. They tend to use alternative funding as a boost once the business gets on a stable track with operations and cash flow.
The main advantage is that it’s an option open to almost all new business ideas with a fair amount of strength and potential.
A renowned service for alternate funding catering to all industries in the market is BusinessAdvanceFunding and if you’re looking for a short and simple online application procedure that is followed by a swift response, we welcome you to submit your business details using our application form.
2. SBA Loans and Federal Grants
The federal and state governments do encourage startups and small businesses with support that comes in various forms. These can vary from industry to industry and from time to time. This blanket of funding options covers the SBIR, STTR, and other programs, including SBA loans.
The main advantages of these are that they are reliable and come with attractive deals. They are well designed to suit the needs of new and upcoming small businesses and projects.
The main limitation is that such grants and loans may not be available to everyone. Factors like personal credit history of the applicant(s), their financial health, location, and industry/sector are crucial. These factors may play a decisive role in the approval of grants and loans.
3. Crowd Funding
Business ideas that are suitable for it and when the people behind the crowdfunding campaign are geared up to get it right either in the first time or in two or three tries without giving up can use crowdfunding as a great solution.
An individual or a team/organization organizes a crowdfunding campaign. They raise funds from a familiar crowd interested in donating money for the cause presented by the campaigner(s). It is an option that works well for business ideas that may be helpful for human development in some way or contribute towards society, culture or other such matters. Good network, reach and presentation skills can make a crowdfunding campaign do well.
The biggest advantage of crowdfunding is that people choose to donate for the cause and hence monetary returns are not expected by people contributing towards such a campaign. The campaigners promise some valuable rewards relevant to the business idea. They offer these rewards in return for donating to the campaign.
The main limitations of crowdfunding are that it isn’t a reliable or predictable source of funding. Many factors may affect the probability of funding. These factors may not represent the business idea’s potential.