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How are Start-up Businesses Financed?
There is a great risk in start-up businesses because it has the potential to fail within a few years so banks are relatively tight in their rules and regulations in granting a start-up business loan. However, there are a lot of other ways in getting funds for your start-up business. Here are the following examples on how you can get funding:
Own savings. This is the most common way of funding a start-up business.
Alternative lenders. Applications are done online. They look at your credit score, business background and business plan and make a decision based on that.
Family/friend loans. This is mainly based on trust and your word. This may require creativity and convincing powers to convince family members or friends to invest in your business venture. However, this could be quite controversial since it may cause family feuds so it is vital to be transparent and honest in doing business proposals.
Venture capitalists/ angel investors. Your business proposal is made public to the market and foreign investors can give you funding if they believe in your product and business advocacies.
Apply for a Start-up business loan. This is the traditional way of getting a working capital for your business venture. It could be a lengthy process of meeting the lending institution’s documentation requirements, but if you get approved for a loan, this could increase your credit score if you are faithful in your repayments. This could also open a door and pave the way for future loans that could help your business expand to increase more business opportunities.
Retirement funds/pension. When people retire, they usually get a huge sum of money and use it for business purposes. Retirement plans vary from company to company depending on the amount that you earn and how much you invest in it, but it could be a good source of a working capital for a business venture.
For a start-up business to be successful, it entails a lot of hard work, determination, and great business skills for it to thrive in a competitive business industry. It takes a lot of passion to pursue and reach your business goals to achieve the necessary business advancement that you want. Be open for suggestions and do your homework in constructing your business plan. Have a vision and stick to it.