Decisions of how much funding you'll need
Funding your business is one of the first (and most important) financial choices made by most business owners. How you choose to fund your business may affect the way you organize and operate your business.
Self-funding Investors Loans
Self-funding is also called bootstrapping, which allows you to use your financial resources to support your business. Self-funding can take the form of asking for help from family and friends, using your savings account, or even using your 401k. By self-raising funds, you can fully control the business, but also bear all the risks yourself. Be careful not to spend more than you can afford, especially be careful if you choose to use your retirement account early. You may face expensive expenses or fines, or damage your ability to retire on time. Therefore, you should first contact your retirement plan administrator and personal financial advisor.
Investors can provide you with funds in the form of venture capital to start your business. Usually venture capital is used in exchange for the company's ownership share and the company's important management power.
Venture capital differs from traditional financing in many important ways. Venture capital usually:
-Focus on high-growth companies
-Invest capital in exchange for equity, not debt (this is not a loan)
-Take higher risks in exchange for potentially higher returns
-Has a longer investment period than traditional financing
-Almost all venture capitalists want at least a place on the board of directors. Therefore, prepare to give up part of the company's control and ownership in exchange for funds.
Crowdfunding is to raise funds from a large number of people called "crowdfunders". Technically, crowdfunding investors are not investors, because they do not obtain a share of the company's ownership, nor do they want their funds to generate financial returns.
Instead, crowdfunders expect to receive "gifts" from the company to thank them for their contributions. Gifts are usually products you intend to sell or other special treatments, such as meeting business owners or obtaining their names in points. This makes crowdfunding a popular choice for people who want to create creative works (such as documentaries) or physical products (such as high-tech radiators).
Crowdfunding is also popular because it poses very low risks to business owners. Not only can you maintain complete control of the company, but if your plan fails, there is usually no obligation to repay crowdfunding. Every crowdfunding platform is different, so be sure to read the rules and understand all your financial and legal obligations.
Small business loan
If you want to fully control your business, but do not have enough funds to start, please consider a small loan.
To increase your chances of getting a loan, you should have a business plan, expense table and financial budget for the next five years. These tools can give you an overview of the amount of loan you need, and enable your loan bank to predict whether they will make a wise decision on your loan.
After preparing the materials, please contact the bank and credit cooperative to apply for the loan. You need to compare quotes to get the most favorable loan conditions.