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3 Funding Options To Consider For Your Startup


The majority of startup businesses fail during the first year of their existence. Lack of funds or capital is one of the reasons for such failures. Therefore, having a stable source of money to support the continuous operation of a business is essential.

If you plan to make a loan to fund your small business, the first challenge you need to deal with is the criteria that traditional lenders have set before giving out cash. Some considerations are your credit score as the business owner, the number of years your business has existed, minimum annual revenue requirements, and the debt-to-income ratio. Other documents such as proof of collateral, bank statements, and personal and business tax returns may be necessary too.

Noncompliance with the set requirements will result in disqualification. If you find yourself having a hard time applying for a loan, consider some alternative options for having capital. These alternative funding options are better if you want a more straightforward and quicker lending process. Also, they’re less bureaucratic than traditional lenders, so expect a smoother and more efficient operation.

Likewise, if you’re a startup that’s looking for a company that can help you find investors to raise your capital, there can be many companies available online, and one of those is cake equity.

To begin, here are three funding options you can consider for your startup:


1. Venture Capitals

Venture capital is a kind of equity financing provided by venture capitalists who provide strategic assistance, finance, potential customers, employees, and partners for a small business.

This option is a good choice for those startups that don’t have enough money to back up a loan. However, venture capitals are hard to acquire as this funding option is fit for small businesses that are already creating profits, that are going after opportunities entailing a high growth potential, those with a strong team, and on those that have some success and have passed their early phase of business. And so, it’s strictly necessary that you put these things in your mind before acquiring the investments of a venture capitalist.


2. Friends And Family

One classic way to fund a startup is to borrow cash from family and friends. This type of funding has no interest compared to traditional banks, so it can help you avoid a hefty debt. Just make sure to reduce your overall expenses so your business can use such cash properly. On the other hand, asking for money from them can have some possible negative consequences. It can negatively affect you personally because there’s a possibility of having a damaged relationship when the cash you’ve borrowed resulted in the loss of returns.

And so, it’s much better to look for sound legal advice for both parties to ensure such things will never occur. Also, another essential thing to take note of is that you and your family or friends must both set a clear expectation on the possible risks that both of you can incur due to this alternative funding.


3. Angel Investors

An angel investor is a rich person or group of private investors looking to offer money for a small business in exchange for having a part in the market shares. Usually, they provide financial support while the business is still starting to sell. They can invest a lot of dollars in exchange for having equities.

Likewise, one disadvantage of having an angel investor is you can lose some control over your startup as angel investors will want to take part in decisions and profit shares. However, the advantage is they can offer more satisfying rates than traditional lenders. In addition, these investors usually put their investment on a business capable of succeeding; therefore, an engaging pitch is crucial if you want this financing option.


Bottom Line

Most startup businesses fail at the start of their operations, and lack of capital is one of the reasons for their loss. And so, finding a dependable lender or funding options are crucial if a business will continue to stay. One funding option is traditional lenders, which exist to help you have cash. However, they usually have a lot of requirements that your business must adhere to in order to have loans.

Therefore, having another plan to look for alternative financing options should be noted. They have a more straightforward and more effective process in ensuring you’ll have the money necessary to operate your small business.

Overall, take note of the funding options in this article so you can know which cash source to choose from besides banks and credit unions.



Business Daily Media