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  • Alternative Business Funding Options for Startups & Established Businesses

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    Where to find starting capital for a business is the question that haunts entrepreneurs.  Although there are many ways of raising funds for business, especially by taking loans, it does not always happen easily. Perhaps this is the main reason that 94% businesses meet with its end within the first year of its inception. Lack of funds can drive businesses anemic, and you know what could happen to it if you are unable to pump in funds at the soonest.  Therefore, it is natural that entrepreneurs fret and worry about identifying the best ways of raising capital, which remains a steady requirement throughout the tenure of business. Entrepreneurs remain on tenterhooks, trying to ensure that they never fall short of financial resources that they can fall back upon.

     

     

     Different businesses need funds at different times with the only requirement that is common to all is to start up. Consider the nature of your business and its type to decide when you would need funds. In this article, we will discuss some funding options for startups as well as businesses of a special type that requires interim funds for maintaining good cash flow.

     

    Self-funding or bootstrapping to start up business

    The biggest challenge that you would face in setting up your business the first time is to garner funds. You have to show some traction and plan for possible success to convince financiers to put in their money, as they would usually be reluctant to come forward. Financiers want to see that the business is on the right track that would give them the confidence to invest.  To avoid the frustration of financiers turning you away, it is easier to rely on your savings and collect funds from family members, friends and colleagues who believe in your entrepreneurial abilities. Once you set the ball rolling, it would be easier to showcase the business to investors that help to draw funds.

     

    Opt for crowdfunding

     When you approach the masses seeking their investment in your business by way of small donations, you tap into the immense potential of crowdfunding, which is gaining popularity.  By enrolling on a crowd-funding platform, you can bring your business idea to the fore and explain to people about its modalities, goals, how you intend to earn profits, how many funds you need and how you would utilize it, etc.  On being able to sell your idea successfully, you would find people taking an interest in it and coming forward to donate generously for the project.  Even if some people refrain from donating, they will commit to supporting your endeavor by pre-buying the product. While you can raise funds, at the same time, you can sell your product.

     

    Let us now move over to businesses that need funding on an ongoing basis and explore the option for funding to ensure steady cash flow that helps a business grow.

     

    Commission advance for real estate agents

     Mostly real estate agents need a steady flow of funds on an ongoing basis to keep up with the gap in earning that arises from the typical cycle of payment of commission. Real estate agents earn from commissions only and the entire business relies heavily on it for funds. They put back their earnings into the business to create funds necessary for running the business smoothly while maintaining healthy cash flow. 

     

    It is thus imperative that they would like to have the commission reach their banks at the soonest. However, the business cycle stipulates payment of commission after several weeks of signing the deal because payment arrives only when the deal is completed. To shorten the waiting time for earning commission, real estate agents take the commission advance route by approaching those involved in real estate commission factoring business and make them agree to buy the commission at a discount. It ensures prompt availability of cash albeit slightly less than the actual amount.

     

    Attract venture capital for your business

    If you believe that your project has considerable potential to move and shake investors by assuring high returns, you can think of acquiring venture capital, professionally managed funds that are ready to invest in companies with high potential. In exchange, you have to offer equity to the investor who stays with you as long as you do not go for IPO or acquisition. In the process, you would also be able to avail the expertise of Venture Capitalists who can act as a mentor for your business. They would keep close track of the business and monitor the movements to evaluate the sustainability and scalability. This kind of funding is ideal for small businesses that have gone past the startup phase, and revenues have started flowing.

     

    Which option would be suitable for you depends on the nature of the business and at which stage of the business cycle you need the funds.

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