From start-ups to established companies, ask any entrepreneur what their biggest challenge is, and they will most likely talk about capital and new funding. There are a number of ways to raise financing and it’s better to have an idea of what strings are attached – before getting in too deep.
As the name implies, this is pulling from your savings or other income sources. One of the advantages of this type of funding is that you retain complete control. Just be sure to stick to your planned budgets, they will help keep you out of trouble.
Friends and family.
Your friends and family are your inner circle of advisers. They will let you know if your entrepreneurial ideas are on target or not. The more they believe in you and your plans, the more money they are likely to invest in you.
Government initiatives have made it easier for businesses to apply for and receive grants. Federal and state entities don’t charge interest or demand control over your company. They are however, usually very specific and it’s a good idea to have an academic help you secure the grant. If that academic gets to publish a book or paper based on the grant, it’s a win for them, too.
This kind of debt allows the entrepreneur to retain full control over the business. The down side is that if you are a start-up, you might have to put up massive amounts of collateral to secure the loan. Established organizations have a better chance of getting a quick infusion of cash, especially if they have a positive cash flow.
This group typically invests up to $250,000 in industries or ideas they are passionate about or have a personal tie to. Your network is of critical importance here. If you have a broad network of friends and acquaintances, you are more apt to get in front of these investors to pitch your idea or business.
While this group has the big bucks – think investments of a million dollars or more, they keep close tabs on that money. Equity and control are typical strings attached to this money. Have an idea of how much of each you are willing to give up before inking this deal.
One of the most popular ways to raise money in this digital age, crowdfunding comes with distinct advantages and disadvantages. It’s great because business owners can get feedback for their ideas in addition to needed cash. On the downside, you might have to give out too many details, or pieces of intellectual property while convincing investors. This exposes you to competitors who might be able to market your ideas faster than you can.
At the FVEC, we have found that both established business owners and burgeoning entrepreneurs want to maintain as much control over their companies as possible. We have helped businesses that participated in our program raise nearly two million dollars in private equity. We strongly encourage interested owners to put together an awesome pitch about their business and apply today.