Pros And Cons Of Going Public And Using Equity Financing Three Major Sources Of Funding Startups

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Three Major Sources Of Funding Startups

Are you a new entrepreneur? Do you need ideas on how to get funding for your new business? Here are some basic ideas that almost all entrepreneurs use to grow their business.

Bootstrapping

It is the best way to build a company without the help of any financier. And it is possible. Bootstrapping is basically building a company with a mix of personal savings and borrowed cash from family and friends. Some shrewd founders recoup their large sums by starting their companies in countries with a relatively low cost of living, such as Chile or Vietnam. Also, with the help of government subsidies they are able to grow easily until they start making returns. Some crowdfunding platforms encourage cash donations from the public in exchange for early access to a company’s products. This has made it easier for founders to get capital without giving away valuable equity.

Equity fund

If bootstrapping is not a viable option for the founders, then they can create a stake in the company for investment purposes. While risk-rich firms are best for startups that need a lot of cash and aim to grow quickly. Not to forget there are many other equity options for organizers with diverse business ideas. New founders should try to get their company into an accelerator. They have a two-three month program that is basically designed to help new startups work through the early stages of development. This program helps you find potential investors at the end of the program. Accelerators have also launched some success stories, whose organizers have received some funding and valuable guidance from some talented entrepreneurs in exchange for a 7% to 10% stake in their business.

Loan Fund

It is not advisable for a young startup to go into debt funding in its early stages. It should be something of a last resort. But in some cases, little cash is needed quickly. In such cases it is better for the company to take stable, old debt and save the trouble of finding investors. In such cases, it is advisable to check whether the business is eligible for any government assistance loans. Such loans usually have promising rates of interest and flexible repayment plans.

Therefore, regardless of the path any entrepreneur chooses to go down for funding, it is important to take the time to intelligently consider the startup’s goals and how the funding strategy adopted will help them achieve them.

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