According to Handy, over 90% of businesses fail in the first year of operation due to a lack of adequate funding. However, even though raising funding is a critical part of business, it is not always easy to acquire enough funding.
Here are a few ways to finance your own online business:
- Crowdfunding – Crowdfunding is a great financing option that helps you get the maximum money since it cuts out brokers and professional investors and allow you to directly transact with common people. Plus, it also allows you to gauge the interest and demand of your product in the market and generate more brand value and recognition.
Thus, crowdfunding is the ideal option for new tech startups that have become very popular. The downside is that it is a very competitive financing option. Your business needs to be on very stable ground, and you need to learn how to attract the attention of the common people through a description and some images for it to work.
Kickstarter, GoFundMe, Onevest, Rockethub, and Dreamfunded are a few popular crowdfunding platforms.
- Bank Loans – If you run a stable and profitable business and want to expand your business operations, bank loans can be one of the most reliable sources of financing options. The best part is that you can choose the type of financing you want — A working capital loan or funding.
Different banking institutes have different eligibility requirements for providing loans and variable criteria that decide the funding limit. However, a good credit score and transparent real-life data can help you get the best deals.
- Bootstrapping – If you are just getting started, finding a reliable source of funding can become a challenge. In that case, you have to rely on self-funding, (A.K.A. bootstrapping). Typically, this means investing your savings as working capital or funding into your new startup. Additionally, you may want to urge your friends and family members to contribute towards the total financial requirement to run the business.
- Consider Angel investors – Angel investors are keen on investing their surplus cash into upcoming startups that they believe would excel in the future. They prefer to invest during the early stages of the company’s growth which is risker in expectation for a high equity (30%) share. Many big companies including Yahoo, Google, and Alibaba have been funded by Angle investors during their early years.
- Venture capitals – Venture capital is ideal for startups that have already started generated revenue and now need big funding and experienced mentorship from experts to make it big. You can gain up to tens of millions of dollars that you can use to expand your network, invest in your business, and scale your business operations, and grow your company. The best part is that venture capitalists can help you evaluate where the business is headed and guide you towards long-term profitable growth.
Handy believes that you should also consider business incubator and accelerator programs to improve your network and create powerful business connections that can help to nurture your business and acquire funding when the time is right.