Most entrepreneurs understand that if the fundamentals of a business idea—the management team, the market opportunities, the operating systems, and controls—are sound, there is a good chance of finding funding.

The challenge of securing capital to grow a company can be exhilarating, but it is also equally threatening. There are certain harsh realities built into the process that can seriously damage a business. Entrepreneurs cannot escape them but can at least prepare for them by knowing what they are.

Angel Investing

Angel investors are influencers who want to invest in a business they believe has the potential to be profitable in the future. However, before approaching an angel investor, you must ensure that you have equipped yourself with a strong business plan.

These investors are also forming groups to make their research on small businesses more resourceful.

Cloud Funding and Crowdfunding

Crowdfunding is a group of individuals who help finance small businesses and help business ideas reach various prospective investors through different platforms.

Cloud funding is a way of financing a business through the internet by a number of investor groups allowing you to pitch your ideas.

Venture Capitalists

Venture capitalists, like angel investors, exchange startup capital for equity. VCs focus on later-stage funding, usually exceeding an amount of $2 million in capital. Venture capitalists do not pay out of pocket but rather invest other people’s money in the form of private equity, pensions, etc.

Bootstrapping

Bootstrapping is the self-funding of a company through stretching resources and finances. In short, it involves starting a company with just your own money and assets. This is often the ideal choice as it gives full control of the business, forces you to produce efficiently, and carries no debt or obligation to a third party.

Get Funding From Business Incubators & Accelerators:

Early-stage businesses can consider Incubator and Accelerator programs as a funding option. Found in almost every major city, these programs assist hundreds of startup businesses every year.

Raise Money Through Bank Loans:

Normally, banks are the first place entrepreneurs go when thinking about funding.

The bank provides two kinds of financing for businesses. One is a working capital loan, and the other is funding. A working capital loan is the loan required to run one complete cycle of revenue-generating operations, and the limit is usually decided by hypothecating stocks and debtors.

The Bottom Line

Companies can raise capital through either debt or equity financing. Debt financing requires borrowing money from a bank or other lender or issuing corporate bonds. The full amount of the loan has to be paid back, plus interest, which is the cost of borrowing.

Equity financing involves giving up a percentage of ownership in a company to investors who purchase shares of the company. This can be done on a stock market for public companies, or for private companies, via private investors that receive a percentage of ownership.

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