If you have a strong belief in your business idea, then there is no better a time to work on your dream project than right now. You may have big dreams, but perhaps unable to finance those. There are ways you can arrange funds for your establishment, such as by taking a business loan or looking for sponsorship or donations. But even before you find ways to fund your dream project, you need to know the important things to do to strengthen your credibility so that investors, lenders, financial institutions, sponsors etc can trust you.
However, before hunting out for financial support, there are certain things to keep in mind.
- Great Business Plan: Put your money where your mouth is. Make sure the business idea is compelling enough that you can personally guarantee any loans you take.
- Save Judiciously: If you are hoping to launch a start-up, you will need every penny you can save. Thus, financial discipline is the foremost.
- Contribute Yourself: Start with the money you have. You may of course look out for investors and sponsors, but if you have anything that you can contribute yourself, then chip in. Having some credit of your own will instil confidence in the investors to support you.
- Borrow Smart: You may have to borrow, but borrow smart. Do not choose expensive loans. When you are thinking to establish a business, then a business loan is preferable over personal loan or credit card loan. A business loan is specially cut out for entrepreneurial needs.
- Essential Documents: As you may be searching for financers, investors, sponsors, you need to keep essential documents and legal papers in place. Keep a track of all important bills and invoices, registration proof of the business, tax payment etc.
- Legal Agreements: No handshake agreements. Put all the terms and conditions in paper and have involved parties sign it. Stick to the agreement and make all payments on time. Keeping the terms of the agreement builds reputation of maintaining good business habits.
- Build Your Credit Score: If you are starting anew, then the creditors or financers would certainly want to understand your financial credibility. If you have a poor credit history, it is unlikely you will be attracting any investors or sponsors. Thus, make sure you have a decent credit score before seeking out financers for your dream business project.
By following the above-mentioned steps, you would prepare yourself to the next important step, that is, look for finances, financers, investors, donors, or sponsors.
Now, we will tell you about different ways you can sponsor your dream business project:
- Peer-to-Peer Business Lending
P2P or peer-to-peer lending is credit advancing system where someone with money will directly lend to you. There would be no banks or NBFCs involved in processing the loan. All you require is income proof so that you can convince the lender of your repayment capacity. P2P loans are more expensive than traditional bank loans. But you may have the option to bargain the rates with the lender, directly.
- Start-up Business Loan
There are several digital lenders, financial institutions, and government loan schemes that help start-up businesses with finances. You may get these loans at a bit higher interest rate than that applied on a traditional business loan for established companies.
- Equity-based Crowdfunding
In equity-based crowdfunding, institutional funders or individuals buy equity issues by an organization. You basically sell a stake of your business to the financer who will then fund your idea.
- Reward-based Crowdfunding
In such finance model, individuals contribute small amounts of money to businesspersons in return of some kind of reward. The reward size depends on the amount contributed. The rewards can vary from something as simple as a personal thank-you note to sharing of profit etc. This finance model is popular with enterprises such as film, technology industries, enterprises in the field of design, arts etc.
- Donation-based Crowdfunding
In donation-based crowdfunding, the donors provide finances to the seeker based on civic and philanthropic motivations. The donors do not have the expectation of material or monetary return in such a financing model. This model works the best for social-cause businesses.
- Debt-based Securities
Here, the business issuer puts ahead a bond note or debenture against company assets. Such model of financing requires requesting resources and support from investors in exchange of an interest. This model is similar to obtaining business loan from bank. The difference is that debt-based securities offer the option of competitive and lower rates of interests, and there is flexibility to secure additional resources.
The above-mentioned funding options for business will certainly help you arrange finances for your dream project. But, according to your current financial position and requirements, you need to understand which of these options would work out the best. Some individuals even opt for a loan against property or soft loan to fund their business. With several options to finance your business idea, there is at least a surety that if you want to become an entrepreneur today, there is no stopping. You just need to take a leap of faith to get things going your way.