PAYSTUBMAKR.COM presenting the sixth part of the guide for successful startup
Five ways for Funding your small business
1. Seed Finance
3. Small business loan
5. Venture Capital Financing
Your plan has to take care of the finances; money is the oxygen of a business, you can not miss a minute without the amount of money that is needed for the company operation. Bills must be paid on time, payroll’s paychecks and pay-stubs must be paid at the exact payday. Your suppliers will stop shipping to you if you are failing with paying the raw materials you need for your production.
Your plan and action should make sure start-up capital is enough so that your finances will cover from the starting day until the day that your business is producing more than it’s expenses.
Some business starts with the founders capital to support the new company until the business gain enough revenue to have its cash flow balanced or having a surplus. By using their capital, the owners are risking the cash saved for years. If the capital was taken from family members, it might have a negative effect on the family relationship if things go bad in the business.
Some suggestions for those who did not get their aunt’s inheritance money and need to finance their new business. Read below about the common ways of raising capital for your new business.
This kind of loan is good for relatively small amounts of money for the stages like market study or building the initial prototypes or service system process or any pre-production work that you may need to make before you can go into mass production or real life sales.
The most known type of seed financing is the Seed-around Financing. In this way, the investor receives a preferred stock for is money. Seed around is a kind of investment/loan that in case of a lost and you liquidate or sell the company the investor use his preferred stocks to recover his money before common stock owners. In addition the investor of recovering his investment the investor can get some return on his money as a “preferred dividends” or “liquidation preferences” as its name says, those stocks preferred then your common shares. Read more What is the difference between preferred stock and common stock?
Accelerators offer financial help to a startup of new technology or another new business idea by making a competition between a few startup groups of the same area of industry, commerce or services. The winner gets funds and seed capital in addition to mentorship and educational program. The Silicon Valley use to center the accelerators operations, these days you can find the acceleration of many kinds of startup all over the country for more information you can read here What Startup Accelerators Do
Loans for Small Business
More conventional business ideas with a business plan that can convince a banker or other type of lender and someone to grant you credit. You can find many types of financing by the banks, a loan for buying your building; another type can be for purchase the equipment you need or for your business expenses. Read our guide, Your guide for Small-Business Online search for Loan. Before you go to the bank, make sure that you can present a meticulous and detailed plan with a budget up to a cent. Consider getting some help with the writing the documentation you will need to convince the bank.
You can think of the new way of funding that is called “crowd-funding” as one why more for financing your business, Kick-starter or Indiegogo are only two examples of Crowdfunding.
It is important to mention that this way does not require you to give part of your business away. The crowd is not going to be your partners; they are going to be your future fans and customers that are interested in supporting your business idea without being your partners. You can give the donors is up to you, but mostly it is between the first people to have your product or get a dedicated model or meet you and your co-founders.
Venture Capital Financing
A small part of businesses gets the opportunity to have access and get approved by a Venture capital investors. Venture Capital, In other words, can be called a risk funds. The higher the risk the higher should be the revenue. To get this kind of funds, you will need to show and convince the prospect that you are going to grow fast into high value and revenue business.
It is common to see one or more Venture capital firms making the large investment that you are looking for, in exchange for preferred shares in the company, in addition to stock they usually take some control of the company like being members of the board of directors, or you will need their approval on substantial transactions. A Venture capital company will look for a significant business opportunity for quick growth of the sales that are missing the capital to take the crucial step for the production and sale of your product or service.
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