How to boost your startup’s finances

Check out these ideas to help figure out where the money will come from to support your start-up.

By Dan Miller

Did you know that 100 million businesses are launched worldwide every year? Each of them aims to become an authoritative and recognizable brand in their niche, boost their conversion rates and, of course, increase revenue. In other words, all these startups have goals similar to yours.

No matter how brilliant your business idea is, if you don’t have the investment capital to support it, it stands no chance of succeeding in such a hectic entrepreneurial ecosystem. The stats back this statement, pointing out that more than 82% of startups and small businesses fail due to financing issues.

Here are several ways to boost your startup’s finances and keep the ball rolling toward success.

Take a bank loan

For many startups, taking a bank loan usually seems like a logical solution. However, you need to know that banks have strict rules when it comes to financing startups. To raise your chances of getting a loan, you need to deliver a perfect business plan and detailed financials that show how exactly the money you get would be used, have perfectly clean credit records or even put up your personal wealth as collateral.

Precisely because of this, you should also consider starting your search for a loan with smaller, community-based banks, as they will have more understanding of your financial situation. Additionally, ask for smaller, specialized loans banks offer to small businesses, such as microloans and equipment loans that are much easier to get.

Sell invoices

One of the most effective ways to boost your capital is to sell invoices. Namely, as a small business owner, you can sell your startup’s accounts receivable to a third party, a so-called factor. Once the invoices are sold, an invoice factoring company gets responsible for collecting payments from your customers. They will advance about 80% of the total sum of your accounts receivable to you within 24 hours on the account approval. On the other hand, you will be paid the remaining 20% (less the fees) in 30 to 90 days, when your customers pay the invoice in full. When compared to bank loans, selling invoices is far more flexible. Apart from providing you with the fast access to cash, it also offers you reasonable factoring fees. Most importantly, to be eligible for it, you don’t have to have clean bank accounts.

Apply for a government grant

Government allocates a wide range of grants to startups and small businesses that contribute to scientific development. There are also numerous grants for minority business owners and women-owned businesses. However, you need to know that securing a government grant is not easy. Namely, such programs require you to deliver detailed proposals, where every aspect of your business is thoroughly explained. Still, investing a great deal of time and effort in this application really pays off. You will get money free of charge that you can invest directly in your startup and you don’t need to repay it.

Find an angel investor

An angel investor is most commonly described as an individual who funds a startup in exchange for convertible debt or ownership equity. These individuals invest in a company through equity crowdfunding or group themselves into angel networks. If you’re comfortable with such an idea, getting an angel or two to fund your business might be a viable option for you. There are several simple ways to find an angel investor, including an angel group or an online platform, as well as finding individual angels through websites like AngelList.

Enter a startup contest

If you have ever watched HBO’s “Silicon Valley,” then you certainly know what a startup contest looks like. Even though it is extremely stressful, it brings tons of benefits to your company. Apart from the money you’d get if you won, participating in a startup contest also provides you with the exposure, brand promotion, and validation. Most importantly, if you won, you would get the money without having to sacrifice your ownership equity or any other aspect of your business. There are numerous amazing startup competitions you should take into consideration, including TechCrunch Disrupt, Amazon Web Services Start-Up Challenge, Web Summit and 7VPD – SevenVentures Pitch Day.

Conclusion

Finally, these are all short-term funding options. They serve as a basis on which you cab build your entire company. Once your startup grows into a well-established, recognizable and authoritative brand, you will be able to invest in your future business goals from your own funds and, most importantly, maintain your financial freedom.

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Dan Miller is a payments officer with nearly ten years of experience in banking and international payments in the Australian banking sector. He has a master’s degree in finance and banking. He is married and also a father of a beautiful little girl.

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