Dreams are beautiful. They come naturally to us. However, only a few lucky ones can realize their dreams. Are the rest sinful? It is just that they were not knowledgeable and made all the wrong decisions, starting from getting funds to the time they contemplated going bankrupt.
If you are a start-up, we will share the top five ways of getting finance for your business. Hence, keep reading till the very end.
What Are the Best Sources of Finance for My Start-up?
“It all started with cash. I secured the initial investment from one of my close relatives and began working on the project. If he had not lent me the cash then, I still would have been a 9 to 5 salesperson struggling to make ends meet.”, said Charlotte Smith, owner of a profitable cosmetic start-up in the Greater Toronto Area.
Well, Charlotte is not wrong. If you have a business idea, have faith in it, try getting finance. This calculated risk might pay off, and you can live up to your full potential.
Below are the five best ways to finance your start-up:
1. Investment from the Personal Savings
Saving is a good habit. Of course, it helps you on rainy days and periods of financial emergencies. But with the success of unicorns, the meaning and purpose of personal savings have taken a drastic shift.
“I saved aggressively in my first 10-years of professional life because I wanted to start an online flower selling business. I did the same, and people now buy my Lilies and Roses through the various e-commerce sites”. Mia Roy is an online flower seller.
Funding your dreams or your start-up through your savings is a great idea.
Doing this will help you save on interest costs and save you from the burden of debt and the pressure of returning funds at the end of the tenure.
2. Love Money
The name might be romantic. Thinkers and movie Nazis might even interpret it uniquely. Hence, let us clear its meaning first.
“Love money” refers to all the legal tenders you secure from your close relatives, friends, parents, and spouse/ partner.
You usually narrate your ideas to these people who know your strengths well and give you the much-needed “money” using which you can start your business.
“If it were not for my mama, I would have always been an employee. She knew I had the potential and supported me with her savings,” said Catherine, co-founder of Crazy Foods Inc., a global food start-up.
So, getting finance from your relatives, parents, and friends is a clever idea. Again, you will not be required to pay any interest (in most cases), and besides this, you will also work more seriously because of the fear of losing your loved one’s cash.
3. Getting Government Funds
Lender of the last resort or the first source of finance, Government funding is no less than an easy opportunity for many. Some can pluck this fruit on offer, and some remain devoid of it.
As per a recent survey conducted by Canada Start-ups, over ten thousand Canadian individuals, over 51% were too afraid of getting government funds. It shows how overlooked and ignored this source of finance is.
It is ignorant who suffers. And if you are doing business, you need to be someone next to the business encyclopedia.
The Canadian Government offers all kinds of financial support to the business owners by providing financial help in the various forms, such as:
- Government loans and loan guarantees
- Funding as venture capitalists via both debt and equity
- Wage subsidies and letting you hire interns at a subsidized cost
- Financial support for the development of superclusters in Canada
- Contributions as grants and financial help
Getting subsidized loans, grants, and aid from the Government will reduce your overall business costs/ expenses and help you establish an excellent bureaucratic network that you can cash at the later stages of your entrepreneurial journey.
4. Venture Capital Funds or Raising Money from Angel Investors
Who does not need a godfather? Well, I do. They give you some ready finance in place of your equity. And the best part is that you do not even need to pay any interest in using their capital. Must pitch your idea by being impressive and aggressive,” said Noah Brown, owner of a 2-year-old tech start-up, newly got $2 million in funding from a leading Canadian venture capital firm.
Venture capitalists are investment firms that raise capital from the public, or we can say manage their cash to invest in budding startups and brilliant businesses.
Getting cash from them is considered a hard nut to crack. If you can achieve this feat, you can take care of all your financial needs.
Below are some of the best points that must be taken care of while raising funds from angel investors:
- Prepare an easy-to-understand sales pitch that defines:
- The nature of your business
- The present financial numbers, such as revenue, debt, sales, etc. and
- The future scope
- Send positive vibes through your communications (both written and oral) that you are a dedicated business professional and have the skills to build a powerful organization.
- Show that besides building revenue and customers, you also intend to turn profitable in the coming years. And you have a definite plan for it.
5. Loans, Advances, and Monetary help from Financial Institutions
Banks. Well, this is the most common source of finance. As a budding entrepreneur, you can always reach out to banks, private lenders, and financial institutions to get finance for your business venture.
However, only impressive sales pitches will not come in handy this time, as you will be required to offer collateral and present them with financial statements to get a loan.
Further, you will also be required to pay equated monthly installments (EMI) on your loans at the contracted interest rate.