Your Startup Business Needs These 7 Types of Lenders

• Posted by Business Guide July 30, 2022 - Filed in Business - #business startups  - 1,420 views

  Start-Up Financing Sources: How to Fund Your New Business

  Starting a new business can be an exciting adventure, but it can also be costly. Before launching your business, it's crucial to have enough cash on hand to hire the necessary staff, purchase equipment, and develop a marketing plan. This requires careful financial planning, and choosing the right funding source is key to success. In this article, we'll explore different start-up financing sources, from family and friends to venture capitalists and help you make the right decision for your business.

  People Close to You: Family and Friends

  When it comes to start-up financing sources, family and friends might not be your first choice, but they are often the most trustworthy and accessible source of money. According to data gathered by the Center for Venture Research, the Small Business Administration, the Angel Resource Institute, and the Angel Capital Education Foundation, family and friends account for 38 percent of new businesses worldwide, with $6 billion invested annually. However, it's essential to ensure that this type of funding doesn't negatively affect your relationship. Financial hardships can put a strain on even the strongest of relationships, so it's essential to borrow money wisely.

  Founders and Investors: Venture Capital Firms

  Venture capital firms are known for offering the greatest funding for start-up businesses, but they only invest in a small number of applicants. In fact, they fund less than 1% of the firms that apply, even though the typical start-up receives $2.6 million in capital. Additionally, venture capital firms often require a sizable portion of your company in exchange for their investment. If you borrow money from these businesses, be prepared to give up full ownership. Even if you accept the conditions, you still need to create a solid business plan and pitch to convince them that you are deserving of their time.

  Angel Investors: Alternative to Venture Capital

  If venture capital firms aren't the right choice for your business, consider angel investors. Angel investors lend to more clients and for around $75,000 less than venture capital firms. For instance, 1% of businesses are financed by angel investors. A solid business plan is crucial for both venture capital and angel investors, and employing a business plan writer for investors will ensure that your venture is trustworthy.

  The Banks: A Traditional Funding Source

  A bank is one of the easiest and most accessible sources of funding for start-up businesses. On average, 1.43% of early-stage startups receive funding from banks, with the average loan amount among all those they accept being roughly $140,000. However, it's rare for businesses to approach banks for financing because the Small Business Administration grants about 100,000 loans to small businesses each year.

  Fundraising: Crowdsourcing

  Crowdsourcing is the fastest-growing funding source, and this trend is not expected to change anytime soon. It was anticipated to surpass $9 billion in 2022 after reaching $5.2 billion in 2020. Websites like Kickstarter facilitate crowdsourcing, and over $6 billion of funds are currently unavailable. Even though financing installments are often under $9,000, which is extremely affordable when compared to other options, the sheer volume of businesses looking for financing helps to make up for it.

  Savings and Credit Lines

  Lastly, don't forget about your savings and credit lines. Over five out of ten new businesses provide their own funding, and the combined value of a start-up business owner's credit and savings may be less than $50,000. Despite the numerous legal obstacles, start-up company owners can access their IRA or 401(k) accounts.

  Final Thoughts

  When it comes to choosing a start-up financing source, there are several factors to consider, including how much money you'll need, whether you're willing to give up ownership, and