What are the best sources of startup funding?

Starting a business is both exciting and scary. You have ambition, dreams, and a solid business idea that you want to get off the ground. The question is how are you going to fund it to bring your business into the marketplace?

This post discusses some of the best sources of startup funding available.

Venture capital

Venture capital is a good option especially if you are looking for a fairly large sum. Typical investment follows a seed funding round. In exchange for venture capital the investors normally require a stake in your company. This can be a little off-putting but many successful businesses have been launched following a venture capital funding round.

Bank finance

Bank finance normally comes into play if you’re an established business although there are exceptions. Since the 2007 crash obtaining funding from banks has proved difficult as their access to credit from central banks has come under closer scrutiny.

Nonetheless, the option is still on the table and if they feel your idea is strong enough and you can present it well you may secure the startup funding you need to launch.

Grants

Grants can be a viable option for startup funding. They normally come with strict conditions and most are research, environment, or employee training focused. Organisations local to the UK are a good place to start but don’t rule out European and international organisations if you feel your offering could be eligible for a grant.

Crowdfunding

Crowdfunding has often shown success over recent years. Many ventures have been launched via this funding source. For every success, however, there has been plenty of failures as trying to get people to buy into your idea from an initial description is challenging.

Crowdfunding works by setting a goal or target for the amount of capital you want to raise and a timeframe to achieve it. If things go well you’ll generate enough interest to hit the target and secure the capital.

Asset finance

If your business relies on a large operational asset then this is an option you can leverage. The idea is similar to higher purchase agreements but instead of paying off the purchase in instalments you rent the equipment from the lender. This can negate a high outlay in the first instance.

To leverage asset finance you have to show that you can afford the repayments.

Venture debt

Venture debt is where funds are raised against a business asset. They are suited to new business who want to expand rapidly. Due to high risks from the investor perspective, the interest repayment rates tend to be higher than other funding sources.

Self funding

If you can self fund your business you don’t have to worry about repayments and a lot of the stress of starting a new venture is removed. That said, some people thrive on being under pressure.

If you can’t self-fund your business, arguably venture capital is your best option as you can secure high sums that can help you launch your business and take it to the next level of expansion.