Securing start-up business finance can be frustrating at times, however, there are a lot of options out there.
You may even find a combination of different funding options is suitable for different stages of the business and different aspects of the business you need to fund.
Government grants and assistance
The Federal and State Governments, and even some Local Councils offer business grants and loans which can be a great way to raise funds for a start-up business.
Grants are obviously a very attractive option to fund the growth of any business as you don’t need to pay the funds back, however they do come with strict eligibility and application requirements. The loans that the Government offers to select businesses are also quite attractive as they often have low or no interest.
Both Government grants and loans are often directed at particular industries, geographical regions and groups of people. To see if there is Government assistance suitable for your business, have a look at the information about the various grants and loans on business.gov.au.
One of the most commonly looked to sources for a start-up business finance is a loan from the bank. This sort of finance is generally easier to obtain if your business has already started to demonstrate its viability with a good track record. As with any funding source, being successful in securing a loan from the bank depends on your particular business, the stage your business is at and what you need the funds for. Typically, you will need to provide an in-depth business plan and demonstrate that you have the cash flow to pay back the loan.
Credit cards can be great for smaller cash injections into a growing a business without having to seek approval from the bank or other sources. With their typically higher interest rates, credit cards are best for smaller amounts of money that you can pay back within a relatively short period of time, otherwise the interest you pay can turn them into an expensive way to fund the business.
Angel investors are individuals or groups of individuals who invest their own money in businesses in return for an equity stake. Because they own a share of your business, and the return they see on their investment relies on the performance, angel investors will often want a say in major decisions. Many angel investors will have business experience and the advice, mentoring and input they offer can be very beneficial. However, you need to consider that their advice and decisions may not always be in line with what you envision for the business.
Having personal savings when starting up a business can be an excellent position to be in, not only to help fund the business but also to pay your personal living expenses while the business gets going. It means you don’t have to start out with debt or give away control or a stake in your business to an investor. Starting a business with your own savings can also look attractive to lenders and investors who you may turn to for further funding down the track.
Crowd funding is a way to fund a business or project with relatively small contributions from a large amount of people. The people who support your project may be contributing money as a donation, pre-paying for a product or service, or investing for a share of potential future business profits.
Setting up a successful crowd funding project takes a bit or work and creativity to get the attention of enough potential backers, however if done right it can be an amazing boost to a start-up business.
It is a fairly new method of funding a business, but it is quickly growing in popularity thanks to the many online platforms designed to facilitate the fund raising process.