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5 Key Financing Options For Your Start-up

2 min read

Lack of funding seems to be a major problem in start-ups, with the common factor being financing. Generating capital to run a new business can be very difficult.

However, getting funds may not be difficult if you know about available funding options. Lenders are more willing now to lend start-ups than before. To begin, conduct a quick search using tips on Luminablog to guide you in achieving this.

Among the various financing opportunities, the best online loan companies may be direct online lenders, large commercial banks, local community banks etc., offering funds at semi-flexible rates.

Below are 5 important financing options for your startup.

1.  Bootstrapping

This is also known as Self-funding. It is so-called because you can get your savings from families, friends and other loved ones. In this option, the cost of raising funds is less and highly flexible because it comes with little or no interest. Savings are, however, encouraged because of its importance.

2.  Raise money by winning contests

There are several contests that can finance businesses. Entrepreneurs should be willing to participate in contests because winning comes with a huge prize. They must also know how to pitch their ideas convincingly to stand a chance.

3.  Crowdfunding

Crowdfunding involves raising funds through the multiple sources available on websites. There are many crowdfunding websites online, which give entrepreneurs multiple streams of funding for their businesses.

Usually,running a campaign for this kind of fundraising is the best method. You should pitch your business ideas intuitively for donations. The advantage of this is that an entrepreneur can raise millions if the campaign strategy is convincing enough.

4.  Request for loans

Lenders offer loans for development and expansion. There are several business loans, such as a line of credit—to manage a company’s cash flow and expenses. This may require annual renewal with an additional fee every year.

Also, working capital loans are loans to manage fluctuations in revenues and expenses. It is usually short-term and does not extend for a long period of time. Equipment loans are loans used to buy equipment. You may be required to pay about 20% of the loan before having the equipment. Thus, the equipment is used as collateral for the loan.

5.  Venture capital firms

Venture capital (VC) firms provide capital to business partners, loans and employees. They finance their options. However, it is quite difficult to obtain. They operate very strictly, offering funds to startups with big potential for expansion and development.

This means that an entrepreneur must use a strong, convincing pitch deck to attract venture capitalists. Funding on this platform involves a lot more than other financing options. This financing opportunity is obtained by people who have strong business plans and prospects for growth.

In conclusion, each financing option comes with its own disadvantages, although some may be greater. The most important thing to note before asking for funds from friends, families, partners, banks and commercial lenders is to ask questions to clear any doubt you might have about financing.

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