Entrepreneurship is an important decision that, although very rewarding, will make you face many challenges.
In addition to the daily effort to carry out your project, there are possible problems to raise money and cover expenses, especially at the beginning.
The first option for setting up a company is self-financing. That is, to take advantage of your own resources and savings. Even so, you may choose to maintain your financial health to deal with unforeseen events, and seek other sources of financing.
And what happens if you have no savings?
You can look for investors for your company, resort to solvency grants for companies and freelancers or take advantage of financing alternatives (Private Equity, Venture Capital, Crowdfunding, Business Angel, etc.) for for newly established SMEs
Choosing one or the other will depend on your business and the capital you need. Don't forget that not all entrepreneurs have the same needs, nor does every private investment for companies involve the same risks.
Traditional financing to start a business
More than 80% of SMEs resort to bank loans, trade credits or lines of credit.
However, although most banks have different financing solutions for companies and support for SMEs, they’e not always the best option for starting a new business.
Public Administration doesn’t finance business projects directly, but it does make subsidies and grants available to entrepreneurs.
The requirements and amounts vary depending on the type of business, although they are normally aimed at specific sectors.
Potentially eligible projects are usually related to innovation, technology or renewable energies.
"I am looking for investors for my company. What should I do?” This question is common among new entrepreneurs.
Recently, "Business Angels" have gained ground in the business market. These are individuals with high investment capacity interested in promoting projects with growth potential.
Business Angels not only provide their financial resources to companies starting a new business project or a new activity: they also offer them their experience in the sector, their know-how and their wide network of contacts.
The so-called "accelerators" and "incubators" are other places where it is possible to find investors.
Friends and family
The 3Fs formula, "family, friends and fools", makes it possible to raise capital without resorting to private funds, without interest and without collateral or guarantees.
However, it carries more "personal" risks if the project does not work out.
New financing channels for companies
Crowdfunding for companies
Although it is usually related to creative projects, more and more companies are turning to this formula to obtain financing.
The way crowdfunding platforms work is simple (a large number of people pool small individual investments to grow an idea) and is expanding rapidly.
The different types of crowdfunding are
- Lending Based Crowdfunding.
- Equity Based Crowdfunding.
- Reward Based Crowdfunding.
- Donation Based Crowdlending.
Entrepreneurs make particular use of the first one, as explained below.
Crowlending for companies
Crowdlending is a type of crowdfunding that works similarly to a loan.
It is based on financial intermediation: the platform connects companies that need financing with individuals who have savings and want to make them profitable.
The tool also manages the study of the company, the formalization of operations, and collections and payments.
This alternative works in a similar way to a bank loan, although the interest to be paid does not depend on the capital but on the risk of the project or company.
Now that you know all the sources of financing, do you know which one to choose? At Jeff we will accompany you throughout your entrepreneurial process and advise you personally. What are you waiting for to contact us?