Finding the Right Funding for Your Startup: Where Should You Begin?
Obtaining funds for a business can be particularly challenging, regardless of the current economic climate of the region or country that you’re in. Whether it is capital for your startup, or for expanding a specific facet of your business, or even to brace for tough times, securing funds will still be a difficult affair.
The exponential increase in startups and entrepreneurship has resulted in the sourcing of other financial means and options for these small businesses. However, one thing that people have to keep in mind is that it is vital for one to comprehend the feasible methods of financing a venture will be different from one business to another.
What type of capital to raise?
It is a commonly known fact that based on the kind of business one is planning to run, they should either choose between an equity and a debt. Each of them has their own benefits. For example, when it comes to debt, one does not dilute or relinquish ownership of the company or business unlike in equity. This is simply because, at some point, the debt must be repaid.
While selecting loans, one has to bear in mind that interest might result in difficult financial periods in the long run, which in turn, could result in insolvency.
Hence, cash flow is needed in order to make payments for both the principal and the interests, and should be well budgeted for. Moreover, the bigger the debt-equity ratio that a company has, the riskier it is for the company to be considered.
Moreover, it has also been observed that debt instruments further contain restrictions on a given company’s activities, thus prohibiting the company from having alternative financial options.
The positive thing about debt, however, is that it guarantees the ease of operations because the company is not necessarily required to give investors periodic reports, or even required to give shareholders periodic meetings. Moreover, it is not necessary for the company to seek the vote of shareholders before executing certain activities.
That being said, debt funding should particularly be accessed an average of 3-4 years after the company has been operated.
When does one proceed to raise capital?
The main rule here is to get a few purchasing customers before proceeding to seek out an investor. Moreover, before contacting the investor, one should also have a co-founder or a functional team.
Hence, one should always raise money somewhere in the line between really needing it and not needing it at all. For example, an ideal method would be to have a good run for at least a year, and then commence on fundraising activities the second half of the year.
Where can one raise funds from?
Getting funding for your startup is akin to getting married. If one does not select the right Avenue or investor for funding, it can prove catastrophic in the long run. Here are some five mantras to keep in mind when searching for investors:
- Ensure they have familiarity
- Are trust-worthy
- Being sure of what you want
- Being frank with the investors
- Looking for investors that are aligned with your interest
More in Career Counseling
9 Fool-Proof Ways to Beat Stress and Anxiety
With today’s fast-paced lifestyle, heavy demands, as well as the current global health crisis, a lot of people find themselves overwhelmed...May 26, 2020
Is It Safe to See Family and Friends Again Once Stay-at-Home Orders are Lifted? Here’s What Experts Say
Because of the COVID-19 pandemic, our definition of normal has forever changed. Due to shelter-in-place orders and social distancing, family members and...May 20, 2020
Effective Ways to Fight Burnout and Maintain a Healthy Work-Life Balance
Do you feel too exhausted and overwhelmed with your work that you start to disengage and stop caring? It may be...May 19, 2020
How to Lift Your Mood and Stay Positive in The Middle of a Pandemic
Even in the best of times, staying positive can be tough. Especially in the middle of a pandemic. With the news...May 13, 2020
6 Things You Can Do During the Summer to Improve Your Career Potential
With all that is happening in the world right now and the emergence of a new normal, this summer is not...May 12, 2020
Parenting in the Time of the Pandemic: A School Psychologist’s Tips on Adjusting to the New Norm with Your Kids
Raising kids is already a tough enough job, more so in the time of the COVID-19 pandemic. Not only are you...May 7, 2020
Virtual Therapy is Becoming the New Norm for Counseling—Here’s How You Can Get the Most Out of It
As the coronavirus pandemic continues to affect public health and economies globally, rising amounts of anxiety and distress have taken a...May 5, 2020
A Doctor Explains if a Headache is a Symptom of Coronavirus
As per the World Health Organization, the most well-known symptoms of coronavirus include fever, tiredness, and a dry hack- some people...May 1, 2020
If You Want Your Kids to be Mentally Strong, Stop Saying These 5 Things to Them
Mental strength can get misinterpreted. Sometimes, your positive words about something they did or didn’t do can turn into a toxic...April 29, 2020