When starting a new business or trading in the first few weeks, getting money to fund your nascent operation isn’t the easiest thing to do. However, it’s just one of the challenges you’ll face as the CEO or CFO of the new startup. Fortunately, there are several finance options open to founders of a startup if they’re willing to borrow money or seek investors.
Here are a few of the ways that an entrepreneur can raise funds relatively quickly.
Friends and Family
Speaking to friends and family about your business, they’re often the first port of call to raise capital in the form of a loan or to take funds in exchange for a small piece of the business equity. However, seeking money from family members is tough because while they’ll always be your family, if the startup doesn’t succeed then they may feel taken advantage of. When giving a loan, even to a company that went under, they’d still feel like you should repay it regardless.
From friends, any business failure and money issue could drive a wedge between the friendship and end it. Taking money in any form from family or friends opens the door to major issues down the line if the business isn’t a success. It should be considered a last resort option.
Unsecured Business Loan
Taking out an unsecured business loan like those offered by Lending Express is a useful option to raise funds to invest in the business. Qualifying for a business loan is easier when it’s unsecured, but startups may find it a little more difficult if they have limited revenue at that time. Nevertheless, an unsecured business loan is an appropriate option to explore further.
Merchant Cash Advance
A merchant cash advance is a useful way to take the credit card receipts for sales and avoid waiting the weeks or months for them to get paid out. A funding provider can supply money based on sales already completed but with funds not yet received. This can ease a financial crunch or provide working capital needs when waiting 30 days for credit card funds.
An angel investor for a startup is someone who may work alone or with partners to put money into businesses they believe have great potential. They will want a piece of the action for their risk but could also require a paid-out component with a loan that supplies cashflow back from their investment.
It is up to the angel investor and the founders to decide what type of deal makes the most sense to them. It’s not uncommon for successful startups to have a combination of early angel investors and venture capital through a series of funding rounds.
The founders of a startup must decide what finance options make sense. Sometimes taking a loan is preferable to selling off a piece of the business for what may amount to a significant chunk of a highly valued company a few years down the line. No decision is right or wrong. Very often, it’s a personal decision.