All of us are now exposed to a totally different world thanks to this unsolicited Coronavirus. We are all saying we are moving towards the new normal as everyone and everything is coming back on the track. But, every coin has two sides. Agreed that this pandemic has taught us some valuable lessons, changed our lifestyles and our behavioural characteristics. However, some segments are still facing various challenges to overcome.
A survey conducted by Inc42 on startup finances in September 2020 found out that “start-up funding is likely to dry up by 11- 36%”. Though we can’t turn our eyes from it yet it’s no reason for us to think that nothing can be done about it. Everyone’s doing what they can and we are too. Well, I hope we could help these startups financially but the reality is we all are in the same boat. But what we can do is to provide some ways one can choose to reinforce their ideas not just financially but with a hope to make the most from it and thrive in these tough times.
It’s not an exhaustive list and depends on what stage the startup is functioning, what’s its financing requirement, market fluctuations and other factors as financing start-ups is a craft, not a science. So, let’s begin with our abridged list of sources of finance you may opt to cash your start-up operations and sustain it. This won’t only help them to survive but also give a boost to our economic growth.
- Personal Financing
As the name suggests this includes using one’s own savings to fund the business. It is generally considered as the seed money for small businesses. The initial funding for an emerging business has often come from its founders. Also, investors will not be willing to invest in a venture if they see that the aspiring entrepreneur has no “skin in the game”.
2. Angel investors
A person who provides some financial support to small start-ups or entrepreneurs is what we can call the Angel Investor. Their net worth and the network is what qualifies them to be the angel investors. They represent an essential source of funding for early-stage, high-risk ventures. Moreover, they are often retired entrepreneurs or executives who may be interested in angel investing for reasons that go beyond pure monetary terms.
3. Friends and Family
Now, it is considered as the most valuable and supportive method of financing. Entrepreneurs network of friends and family can provide a personal endorsement to the investors. Another reason is that they would truly want you to be successful and believe in you no matter how you are doing right now. Your inside circle have often been the first outsiders who invest in your idea. They are also not motivated by the profit factor they just want to see you succeed.
4. Microloans
It’s a fact that you may have a brilliant idea to work on but when you went to sanction a loan you were rejected as you are not qualified to authorise a loan. In such a case, you can take the support of such private companies who provide loans to those who would not normally qualify for bank financing.
5. Vendor Financing
It happens a lot that you want to procure the product inventory but since you don’t have enough cash to settle the supplier’s account you stop in the midway and this affects your revenue generation and reputation. But, don’t worry. Many suppliers or distributors can be convinced to defer payment for some future date or when some revenue is generated by selling goods or rendering services. It usually depends on your creditworthiness and payment of some extra fees.
6. Purchase Order Financing
Here we go. A business receiving large orders may sometimes create problems than benefit. Why? Well, receiving a large order means more funds to invest in the production cycle. Also, your supplier may want upfront payment for their supplies to you. And not always you can have such a huge amount of cash to finance it. Especially when we are going through a situation like these. Therefore, some companies can provide you with finance to produce the order you have received and repay it on receiving the payment from the customer.
7. Crowdfunding
Collecting funds through the power of the internet is also becoming popular nowadays. Innovative businesses are now also using the social media platform to appeal for financial support through crowdfunding campaigns. You can circulate your imaginative and innovative plans on the relevant platforms and provide some perks too to those who may be willing to invest in your idea. This approach can also help you increase your business reach and connect with like-minded people in the process. Some such platforms are Kickstarter and Indiegogo.
The success of any business can be affected just by the mere fact that they don’t have the required funds. It’s the universal truth that without sufficient financial resources it’s not easy to start your journey in this up and down world. Several ideas couldn’t become the reality just because of lack of financial support and exposure.
This pandemic has created a situation which is testing our perseverance and ability to cope with these unwelcome times. It’s true that to reach a level where everything would be just fine as they were before the pandemic, though not the same, is not easy. So until then, we must stay connected and do what needs to be done. It’s not our job but our moral conscience to support those who are in need and want to come together to form a network where everyone is connected. Only then we will be able to achieve the new normal.
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