Are you ready to get started and start your own project? The most difficult part of this adventure is finding the funds. There are many ways to finance yourself, and as a young entrepreneur, you may not have access to all the solutions. It is very important to choose the one that best suits your business. Here we show you different financing possibilities for a start-up.
- Personal savings
Have you been able to save some money? You can use this money reserve to finance your start-up. It is the most secure way of financing because you will have no debt to repay. You will not have an endless file procedure. On the other hand, by using your savings, you will lose your financial stability in case of an emergency.
- Borrow money from your family or loved ones
It is possible to borrow money from your family or loved ones. They may sometimes ask you to pay interest on the amount borrowed. Obviously, it is easier to borrow from your family than from the bank. The disadvantage of this practice is that if you lose money, it will be that of your family or loved ones, which can damage the relationships you have with them. In addition, your family can buy shares in your business. Make sure these shares are minimal so that you can always have control over your start-up.
- Financing by the bank
One of the most used forms of financing is financing by the bank. The idea here is to convince the bank with your business plan that it wants to inject money into your project. Note that you will not always be warmly welcomed by all banks if your company does not yet generate revenue. Moreover, this type of financing does not give them shares in your business. They will therefore likely require collateral (e.g seizure of property, your own funds, or company funds) to cover cases where things are not going as planned with your project. Remember that you will have to pay the interest on the amount borrowed.
- A personal loan
In addition to financing your business through the bank, you can choose to take a personal loan and use the money to finance your start-up. The amounts of these loans are generally smaller than those of the corporate credits. The bank will study your financial situation and not the potential of your business. They are therefore easier to obtain. You can apply online via a form and the money will be paid into your account in a few days. Attention by cons, the risk is greater with this kind of loan. Even if your business is in financial difficulty, it is in a personal capacity that you will have contracted this loan that you will have to continue to repay.
- Business Angels / Venture Capital Companies
If your loan application is refused by the bank, you can try the solution of business angels or venture capital companies. These forms of financing are similar but not identical. A business angel is a person, often an entrepreneur, who seeks to invest his money in a start-up or scale-up, often in the branch in which he has been active during his career. It not only helps in financing but also gives advice on running your business. Business angels often do this in exchange for shares to have a stake in the company.