First Steps to Funding
A business or product can be revolutionary and innovative but without funding, it may end up going nowhere. Funding is essential to the development of a business or product but is not necessarily easy to come across if you don’t know where to start. For those of you seeking a roadmap as you begin searching for funding opportunities, look no further than this article where we will introduce you to important concepts in funding strategy.
The first question you should ask yourself when looking for funding is whether you’re looking for debt or equity funding. Debt financing means that the money you receive from an outside source, perhaps a bank, is to be paid back in the future, likely with interest. Equity funding means that the money you receive is being exchanged for equity in your company. The questions you should ask yourself when deciding which route to take include: how much money you need, how quickly you need the money and how much control you’re willing to give up in your business. Regardless of which option you choose, you should make sure that your accounting and financial statements are up to date and well kept because any investor or funder will want to understand where their money is going and how it’s being used. Once you make that decision, you can start looking for specific options. If you choose debt funding, you will likely be looking at finding a bank loan. If you qualify, you can do this through the U.S. Small Business Administration who will help you find lenders in a way that minimizes risk for both parties. There are several types of loan options you can explore such as long-term loans or microloans. If you choose equity funding, the first step is to start looking for local investors. Though their contributions may be smaller, your chance of receiving funding is much higher. As you accumulate funding, you will, as a result, be receiving validation of your business plan and can expand your search outside of your city or state and look in other areas. Another option for funding comes in the form of grants which are usually given out by a government or public entity. This type of funding is not repaid, however, the qualification process is often much more intensive. Finally, crowdfunding is another avenue of funding that is often best for companies that plan on selling a product. Crowdfunding often takes place online through platforms such as gofundme.com and can help evaluate market interest in a product.
When it comes to funding your business, there are several routes to take. It is important to align your funding strategy with the overall goals of your company and that is something we at Vikriti Management Consulting would be happy to walk through with you.