A successful startup not only needs a great idea, but also the funding to make that idea a reality! Finding the right funding for your startup can be a challenge. Before you can weigh the pros and cons of each, you need to know your funding options – grants, equity funding, debt funding, crowdfunding, competitions and contests, or accelerator funds (View Startup Funding Options Blog).
Before you consider your funding options, define your needs and determine how much funding you need. Ask yourself:
What will the funding help you accomplish?
When do you need the funding?
What will be the return on my investment?
What business expenses do I already have?
What are you willing to exchange for the funding?
There is no one size that fits all for small business funding. The best option will depend on your business. Here are a few key factors to consider:
Type of Business: The industry and type of business will guide your funding options. B2C products and services are great for crowdfunding. Scalable technology startups, financial startups, and healthcare startups are often successful with equity financing. Lifestyle businesses have a greater success with bank loans and SBA loans.
Control: Your ownership structure will influence if equity funding is an option. For the business to sell partial ownership in exchange for capital, the owners must be willing to give up some control and integrate additional stakeholders into the decision-making process.
Network: If you have a large network of professional connections, it is often easier for a business to connect with an investor or someone who can connect them with investors.
Timeline: Debt financing is a quicker option than equity financing. You could potentially get a loan within the week, while connecting and nurturing the relationship with investors is far more time intensive and lengthy.
The funding you choose will depend on your business. Reflection on your business and preferences will help guide your funding options. If you are still uncertain, discuss your funding option with a business coach. Not only will they be able to provide guidance, but they may also be able to recommend specific grants or contacts in the industry.