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Funding Your Business: Become A Unicorn?

Funding Your Business: Become A Unicorn?

Funding Your Business or Failures

Funding your business at the right time affects your business success. Most small businesses need financial support, especially at their early stages. Financial needs largely depend on the structure of your business, your business vision, financial and industrial circumstances. Every business needs working capital. No matter how big the investment capital is, if there is not enough working capital, the result will be a failure.

The biggest mistake of many small businesses is that they cannot accurately estimate their working capital. As we explained in our previous blog, millions of new small businesses are created each year, even if there are some very successful ones such as Le Marche Leather, but most of them fail. The main reasons for failure can be expressed as insufficient funds, bad location, and bad management. From 2000 to 2019, small businesses created 10.5 million net new jobs, while large businesses created 5.6 million. From 1994-2018, the ten-year survival rate was 33.6%, and the fifteen-year survival rate was 25.7%.

If you want to make your business a unicorn, you should not go wrong with funding. Lao Tzu says a journey of a thousand miles begins with a single step. Walter Scott depicts the goal as "teach self-denial and make its practice pleasure, and you can create for the world a destiny more sublime that ever issued from the brain of the wildest dreamer."

Funding your business

Funding your business can create a Unicorn

Several Ways for Funding Your Business

You can fund your business largely by

  • your own resources (Bootstrapping),
  • investors,

Bootstrapping or self-funding can be considered as a first funding option because of its advantages and easy availability. However, this is a suitable option only if the initial requirement is small. Many small businesses need money from the very early stages, so bootstrapping cannot be a good option for funding your businesses.

How to get venture capital from investors

There is no one size fits all solution for finding investors, but there are some basic steps to follow.

  • Search for venture capital firms or angel investors. Try to find out the best option for your business in terms of industry, geographic area, and your business need.
  • Send them your business plan. Why does a good business plan for investors matter? A good business plan is similar to a personal CV. It includes sets of skills, experience, ambitions, and goals. Business plans should reveal their references, capacity, goals, and be reassuring. Reliable financial data and realistic projections always look more attractive for new investors.
  • Due diligence review makes sense: It shows your business market, products and services, financial statements, and corporate governance documents.
  • The terms and conditions: If you agree on a term sheet that describes the terms and conditions for the money to invest, you sign the agreement.
  • Funding or investment.

It does worth reminding that angel investors and venture capitalists are NOT the same. Venture capitals invest in your business by trading equity for capital. They can provide an abundance of knowledge and industry connections for businesses. Angel investors are individuals who are more likely to invest in startups or early-stage businesses.

Crowdfunding is one of the popular ways of funding your business, which takes contributions from many people. Contributions may be a donation or online pledges with the promise of pre-buying the products.

Why Crowdfunding is a good option for funding your business is that it can generate curiosity and hence helps in marketing your product or service alongside funding your business.

Funding your business

Send investors your business plan

Funding Your Business Through A Small Business Loan

Venture capitalists have very specific investment strategies and want to be involved in your businesses' operations and decision-making process. On the other hand, you can retain complete control of your business by funding your business through a small business loan. If you have a business plan, expense sheet, and financial projections for the next five or more years, you can contact banks and credit unions to request a loan for funding your business. Peer-to-peer (P2P) or marketplace lending platforms, convertible debt, and merchant cash advances (MCA) are other nontraditional options for funding your business.

Convertible debt is an agreement that investors convert the debt to equity in the future in the collective agreement.

Unlike small business loans, a merchant cash advance is where a lender extends a lump-sum amount of money and then buys the rights to a portion of your credit and debit card flows.

There are also other Small Business Administration investment programs such as,

Small Business Investment Company (SBIC),

SB Innovation Research (SBIR) program, and

Small Business Technology Transfer (STTR) program. If you need more information, please contact Liberty Business. We are ready to help you.

Advantages Of Working With Nontraditional Lenders

Funding your business with nonclassical or alternative lending can help you get stronger and experienced partners who can introduce you to new media, marketing channels, markets, and clients.

Main advantages of working with alternative lenders include:

  • Credibility: The reputation of the lending institution or person gives you an advantage.
  • Know-how is essential for a growing company. Collaboration with large companies or getting support from them offers great advantages at a low cost. Collaborating businesses often have a great deal of industry experience. They take part in the board as strategic partners in return for their investments. Their sectoral experience contributes greatly to the success of the company.
  • Industrial infrastructure support: Larger partners likely have teams for what smaller companies need, such as IT, marketing, and more. Small businesses can utilize all these facilities at a reasonable rate or sometimes no cost.
  • Keeping your own identity: Bigger or reputable partners do not interfere with your business. They have their own businesses and many things to deal with. You can practice in your own manner for routine business activities.

In a nutshell,

You can fund your business largely by

  • your own resources (Bootstrapping),
  • investors,

Bootstrapping can be considered as a first funding option because of its advantages and easy availability. Venture capitals invest in your business by trading equity for capital. They can provide an abundance of knowledge and industry connections for businesses. Crowdfunding is one of the popular ways of funding your business, which takes contributions from many people. Contributions may be a donation or online pledges with the promise of pre-buying the products. Venture capitalists have very specific investment strategies and want to be involved in your businesses' operations and decision-making process.

On the other hand, you can retain complete control of your business by funding your business through a small business loan. Peer-to-peer (P2P) or marketplace lending platforms, convertible debt, and merchant cash advances (MCA)are other nontraditional options for funding your business. There are also other Small Business Administration investment programs such as Small Business Investment Company (SBIC), Small Business Innovation Research (SBIR) program, and Small Business Technology Transfer (STTR) program.

As A Team, We Are Ready to Help You!

 To start and run your business in the USA, you need a lot of documentation to be prepared. When you need assistance for funding your business, we can help you. You cannot be an expert in every subject you need. An expert consulting firm you can trust will save you time and money.

Comprised of experienced business attorneys, marketing experts, business advisors, and blockchain professionals, Liberty Business has the answers to any questions or needs a blossoming business may have.

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