5 Ways of Funding a Business
The best way to fund a business is to use your personal money, provided you don’t max out your credit cards and exhaust your savings. If you have money to spare and you would not go broke on a rainy day, self financing is the best option. You don’t have to pay any interest, you do not have to dilute your ownership and you would have absolute freedom to use the funds the way you deem fit. The other option is to ask your family and friends to help you out. This may not be possible if you don’t have reasonably prosperous parents, relatives or friends. You can use your personal or professional network to raise some funds. This may not get you enough money to start a business or to fuel the necessary growth.
- One of the best ways to fund a business is crowdfunding. There is no need to dilute your ownership. You don’t have to change the way you do business. No one would exercise any control over how you go about running your enterprise. The only challenge is the nature of your business. The product or service must be exciting enough to motivate ordinary people to invest. crowdfunding has its limits but there have been projects that have managed to generate several hundred thousand in one round of funding.
- Angel investment is perhaps the best option available for Stuart. Angel investors do not ask for repayments if their investment generates no returns in the event of business failure. They would seek some ownership and they may also want to offer some expert guidance. The hand holding can be useful. Many angel investors have priceless experience. Some may even have domain expertise relevant to your business. An angel investor can provide you all the cash you need to start a business or to expand your enterprise.
- Venture capital or hedge fund is another option. It is more lucrative than angel investment as you can raise more funds. But most venture capitalists or hedge fund managers would want to have a say in your business. They would not only want a substantial ownership but would also want a presence on the board. Venture capitalists and hedge fund managers usually intend to enter a deal and exit it at the right time to make windfall gains. If that does not suit your business objective, then you need to consider other options. Not all venture capitalists look for an early exist, especially if the business has long term potential.
- Bank loan is the most traditional option. You can use your business infrastructure or personal assets as collateral. You can even get a bank loan to fund ideas but such propositions need to be truly game changing. Most banks would want to invest in tangible enterprises, not businesses where there is no major physical infrastructure or if the intellectual property is of very little value.
- You can go for accounts receivable or a line of credit. Accounts receivables with suppliers and clients can be planned in a way to start your enterprise or to fund limited expansion. A line of credit from your bank or a credit union can come handy to start a business, to take care of overheads or to facilitate expansion.
About the Author
Morris Edwards is a content writer at Company Registrationin Singapore.com.sg, he writes different topics like 4 tips to ensure crowd funding campaign success, What are the Government Funding & Assistance Schemes in Singapore? and all topics related to Doing Business in Singapore. For more info about Singapore Business Registration visit our website.
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