Entrepreneurs know that every dollar saved in the startup phase of the business is critical to its survival. That’s why the mode of financing that an entrepreneur chooses at this stage of the business is critical. The more cost-effective and flexible the financing is, the better. To help entrepreneurs navigate through this phase, here are 6 of the best ways entrepreneurs can finance their startups.
1. Get an installment loan
This is one of the best ways for an entrepreneur to finance a start-up business. That’s because an installment loan is not only easy to access, but also flexible enough to give the start-up room to grow. It gives the business room to grow since the installments can be structured to be lower than the the startups cash flows.
2. Trade future earnings for capital
This is a relatively new, but highly effective way for a startup to raise capital. How does it work? Well, it’s quite simple. The startup founder pledges a percentage of future earnings to investors in exchange for capital to run the business. The best part about this form of startup financing is that it gives the startup founder time to run the business before they can start sending cash out in investor payments.
3. Internet crowdfunding
This is another highly effective way for a start-up to raise capital. This method entails a startup founder pitching their ideas to online investors. They are offered a piece of the business in exchange for capital. The great thing about this method of raising capital is that the startup has no obligation to give a return to the investors until it can generate sufficient cash flows. Besides, it’s a relatively cheap way of raising financing since the startup doesn’t incur any costs upfront.
These are small loans that are made by small financial institutions. The best part about using microloans to grow your business is that they are tailored for the needs of small businesses. For instance, the interest rate and loan repayment period can be adjusted to meet the needs of the startup. That’s definitely a plus for any startup, since this is the stage of the business where consistent cash flows are a challenge.
5. Family and friends
Raising money from friends and family is one of the best ways to finance a startup, and for two reasons. Firstly, it is quite cheap and flexible since it comes with no conditions. Secondly, family and friends do not just provide financing, they can also help with the business, which can be quite a boost to a startup.
6. Initial coin offerings
This is one of the latest and most effective ways for a startup to raise capital. Under this method, the startup founder launches a coin in the cryptocurrency space, with such a coin representing investor value in the business. This is a very effective way of financing a startup because; the startup receives funding even before implementing its ideas. This means that it has the latitude to launch in the best way possible, and fight its more established competition.
Shruti Gupta is a writer, marketer and outreaching expert .She writes about technology, startups & other niches. She has contributed to a number of famous websites like Thenextweb, Deccanchronicle and Crazyegg. Stay tuned with her at:@shruti_gupta01 or via Skype : shrutigupta2811