When it comes to finding the right funding for your startup, you need to think about your business goals. You can get direct investment from venture capitalists, but you’ll also be turning over shares of your firm, which means you will lose a portion of your autonomy. Or, you can keep your autonomy and get a traditional bank loan, but then you will be handicapped financially with the loan, at least in the beginning. Relatively new ways of raising money over the internet, such as crowdfunding, have made it easier to raise money without debt and without losing autonomy. But crowdfunding can be difficult, especially with many competing campaigns. Microloans are another option, but the amount of money you can hope to raise isn’t very significant yet. You’ll have to determine which form of funding is the best for your business.
Traditional Bank Loans
Traditional bank loans are the way that most people go when they are raising money for their business. They’ll put on a suit and go into a bank, trying to sell the bank on their business plan. This can be a tedious process, but it is still the most reliable way to get funding. The biggest issue is that you’ll be paying your loan back almost immediately and you won’t have as much time to experiment and try out new concepts before you have to start making money. You can get large amounts of money relatively quickly though, which is why bank loans are still option number one.
Venture Capital Firms
Venture capital firms can quickly infuse your business with cash, and you won’t have to pay back any loans. The catch? The venture capital firm is paying for a slice of your business—and giving up shares means that you give up a measure of autonomy. Venture capital firms can be very helpful in pushing your business in a good direction, but there is the possibility that they want to do things differently than you do.
Crowdfunding is relatively new, and takes place entirely over the internet. A great example is a website like GoFundMe.com, which allows businesses and individuals to quickly post a funding campaign and blast it out to friends and family across social media. Crowdfunding is a pretty crowded space, and it can be difficult to get your campaign out there. But there are some major success stories from those who chose crowdfunding instead of the traditional routes.
Microloans are also relatively new. Instead of getting a loan from a bank, you can get a loan online from other individuals just like you. The problem with microloans is that the interest rates are significantly higher, which means that you can end up paying much more money than you would through traditional funding routes.
Regina Fasold is a seasoned Executive Coach and Leadership Expert. Her extensive professional background and her 10+ years of experience as a Global Executive Coach have allowed her to assist over 300 senior executives in corporations throughout the United States and in over 25 countries around the world.