How to Choose the Right Funding Strategy for Your Business

How to Choose the Right Funding Strategy for Your Business

Trying to decide how you will fund your new start-up venture? There are a few different options available to you, as described in our blog post “How to Get your Business Funded”. These include short term loans, business grants, crowd funding, and angel investors. It’s important to consider all of your options before settling on one, but it can be difficult to know where to start. Here is a little food for thought to help you identify the pros and cons of each option and decide which is best for you.

Loan or Investment?
When deciding how to fund your business, there are lots of questions you need to consider. Are you happy to share some of your equity, or do you want complete control of your business? What about being in debt – is this something you will feel comfortable with while getting your business off the ground? If you don’t feel strongly either way about those issues, consider whether you need more than just money. In exchange for equity of your business, an angel investor can provide valuable funding and expertise – just think Dragon’s Den, only less intense! If there are skill gaps within your team, you may benefit from the support and guidance an angel investor can provide.

 

Choosing An Investor
Choosing an investor is another big decision in itself. In his book Like a Virgin: Secrets They Won’t Teach You at Business School, Richard Branson says: “While your prospective partner’s ability to fund the venture is important, it is not the essential quality that will sustain the relationship and the business in the long term.” There is so much more to think about than money when choosing an investor. The qualities they bring to your business are just as important, so you need to think about what role you would like this person (or people) to play. How much involvement do you want them to have in the day to day running of the business? Do you need someone to give you advice in a particular area, or would you prefer them to take a step back and let you run the business as you see fit? Will this person give your business the time and space it needs to grow, and will they be as enthusiastic about it as you are? The right investor can prove to be even more valuable than the money they bring with them.

 

Securing A Business Grant
Business grants are available for start-ups, but they can be complicated and stressful to get hold of. Each grant will have its own set of criteria you must meet in order to be eligible. Some are provided by the government, and some are targeted to specific industries or locations, so with a little research you may be able to find something relevant to you. However, securing a business grant takes a long time and you may not be successful. If you need the money quickly you may want to look at other options – or at least consider getting a short-term loan while your application is being considered.

 

Is Crowdfunding Right For You?
Crowdfunding gives you a way to raise funds for your idea by promoting it online to the very people who will want to buy it. You could use a crowdfunding website such as Kickstarter or GoFundMe to describe your product, showcase it in images or videos, and offer pre-orders and other gifts or exclusive benefits in return for payment. With a lot of promotion, this slightly less conventional way of funding your start-up could really pay off in terms of giving you the cash you need and garnering public interest.

But how do you know if it’s right for you? Crowdfunding works best if you already have a large network of people who may support your business idea, and who you can reach on social media. These campaigns shouldn’t be seen as the first step to promoting your product, but as the last step when you already have a large following and now need to spur people into action so that your idea can come to life. If you have a loyal following, you can use social media to rally the troops and increase your customer base, all while gaining funding for your project.

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