It doesn’t matter if you’ve got the best business idea in the world. It doesn’t matter if your service or product could change how we, the human race, live our lives. If you can’t fund your business, you aren’t changing anything.
Funding your idea is as important now as it ever has been. Cash is king in the business world; without it, you won’t get far. But this can present a curious problem for many small business owners and entrepreneurs.
How, in 2017, do you get the funding your company needs? There are, of course, a few well-known ways to raise money for your business idea:
The Common Funding Methods You May Want to Avoid
For many years now, there have been three primary methods of fund acquisition for the small business owner in the room. Open to pretty much everyone, they’ve risen to prominence due to their accessibility.
- Bank Loans — Perhaps the most common way for an entrepreneur to gain the capital they need to start a business is a bank loan. Presenting your idea to a lender, you take out a lump sum with the intention of paying it back in instalments once your brand takes off.
- Capital Investors — If you’ve seen Dragon’s Den, you know what a capital investor is. A wealthy person or entity (such as another business) puts money into your pocket with a caveat. It may be repayment, like a bank loan, or it may be in return for shares or control of some of the company.
- Self-Funding — Why find somebody to pay for your business venture if you can pay for it yourself? Countless entrepreneurs and SME owners have backed their own ideas with their own cash.
So, what’s the problem with these tried-and-tested methods? While admittedly they all have their benefits, they also all have significant drawbacks.
Bank loans incur huge interest repayments and, if unpaid, can result in very stressful situations and even the repossessing of your home.
Capital investors come with somewhat less stress, but they do often mean you give up some amount of control of your business, which is not ideal when you have a particular vision in mind.
Finally, self-funding is perhaps the most appealing of the three. You have no debtors, but yourself and you keep complete control. However, if things don’t go as well as you’d hoped, you can sink huge amounts of your personal wealth into a business and end up with nothing to show for it.
Three Business Funding Options to Consider in 2017
Thankfully, the old ways are not your only options.
As the business world has developed, new ways of funding have worked their way to the forefront. Nowadays, bank loans and capital investors aren’t your only option for third-party funding.
If you’re looking for another way to build up financial backing for your idea and don’t fancy becoming indebted to a bank or relinquishing control of your idea, we recommend you consider attempting to gain funding through these three methods:
Grants and Financing
Support in the business world isn’t always about getting a return. Some enterprises, organisations, institutions and even governments just want to help support the growth of certain ideas and industries.
Often reserved for upcoming markets (such as those in new tech or media) or in ideas that will benefit people as a whole (like green energy), grants and institutional financing are basically gifted lump sums that you can use to develop your business concept.
These kinds of grants and financing options are available from multiple sources, all over the world. To find out if your business might be in with a chance of gaining grant funding, simply do some online research into your sector and industry. Virgin Startup has a great resource you can check out here.
Awards and Competitions
Similar to grants, many SMEs are now finding funding through winning competitons and acquiring awards. As a method of finding new business ideas and talented entrepreneurs, a number of competitor platforms and award systems have been established in recent years, which aim to provide funding and other resources to up-and-coming startups.
Obviously, being competitions, gaining funding through this method can be tough. You’ve got a lot of businesses vying for the same rewards. However, if you can present your idea well enough and it is unique or appealing, you can gain incredible benefits from these sorts of competitions.
Not only do many offer funding as prizes for the winners, but also consultancy, networking opportunities, free promotion and a rise in brand awareness amongst industry professionals.
The digital age has brought with it a number of innovations that can help SMEs grow and expand. For example, communication has become so much easier, meaning building contacts is now a global venture for even the smallest company. Another way it’s changed the game is in how you can acquire funding.
Online crowdfunding platforms allow businesses to gain backing in a similar format to old-school peer-to-peer lending. Now, though, the scale has been broadened, opening up better opportunities for acquiring the cash you need.
The process is fairly simple. You join a website, such as Crowdfunding.com or Kickstarter, and promote your business idea, asking for money. Individuals can the input as little or as much as they like. In return, you may offer them a small amount of shares, free products, or even nothing at all — if what you offer is so good that people will want to help fund it purely so it exists and they can use it.
The only drawback here is that nobody is going to fund your business if it’s something important but mundane, like an accountancy firm. It just isn’t meaningful or innovative enough to warrant public interest. Crowdfunding is the platform of new ideas and concepts, hence why Oculus Rift, the virtual reality project, did so well.
If you’ve got something that is new, exciting and that you think the public will get behind, crowdfunding is a powerful capital acquisition platform. Just don’t go into it thinking you’ll get all the money you need to start up your budget hotel.