Funding Types

Self Funding

It’s the most effective way of funding your business in its initial stage. It helps in avoiding formalities and avoids the cost for raising fund from other sources. This funding process is also considered as first option because of its many advantages one of its advantages are it helps the owner to tied to its business as he has put his money in it. Any companies backed by the bootstrapped in its initial stage shows that the person has uses its savings and these types of owners have one goal i.e. to enhance their product in the market and wishes to raise revenue from it.

Equity Funding

In this type of funding company raises fresh capital by issuing its company shares to public, investors or financial institution. Those who purchases the shares becomes the shareholders of the organization as they have received ownership interest in that company.
There are 3 types of Equity funds: -

1. Angel Investment
   This type of investment is mostly found in the early stage of the company. The average amount invested by angel investor in this type of investment ranges from $10k to $100k. Mostly entrepreneurs seeks capital from angel investors as they can reach up to hundreds of thousands or millions of dollars. The angel investors tend to invest in the company though they don’t have no customer base but have an exciting idea to implement. In other words, we can say that angel investors are the one who takes the maximum risk compared to those investors who invest in later stages of the organization. These angel investors are high net worth individuals who look to put their small amounts of money into companies and most important they take their own investment decision.
2. Venture Capital Investors
   These are the investors who enters after angel investment because venture capital investors are mostly known for high investment and it can be an individual or it can be an organization.The main goal of a Venture capital investor is to help the organization to grow during its initial stages and increase the company value in the market so that in later they can sell their stake for a large amount in the market. If one required fund from the Venture capital will have to offer them one seat in company’s board of directors.
3. Private Equity Funds
   This round of investment is led by a private equity firm who raises fund from pool of investors and works as advisor and manages their fund by investing on behalf of them. The focus of the private equity fund is long term investment opportunities more likely 10 years or more. They also help the funded organization in their operation works and, in their decision, making process in order to increase its value.

Crowdfunding

A one can Figure out the meaning of this term by spelling out i.e. getting fund from the crowd as we can elaborate that collection of small amounts of capital from large number of people. To receive this type of funding a one requires vast connections with peoples,or one can try to put itself on social media platform to get the world out about its idea, with the goal of attracting investors. Currently these types of funding gaining a lot of popularity because of its unique way of funding the companies. Its just like getting loan or investment from different sources at same time. One should keep in mind as these may be most popular way of funding but its very competitive place to earn funding , so if you have a concrete, effective plan and market strategy ready with you then you are in the game otherwise you are nowhere standing in this competition.

Loans

Bank Loans can be a better option regarding investment for a company as it has very less demand in compare to other source of funding like you don’t have to give up your control of business, a one can opt for this mode of investment if he has a good knowledge of interest rates that comes with each options. But where the term money and fundraising comes one should assume that there must be some hurdles like wise in bank Loans it involves lots of documentation and paper work, have to choose best option for repayment otherwise you may land your self in trouble last and not the least the money have to be paid back whether you business succeeds or not.

Prize Money

Companies can participate in multiple eventsto present products. Organizers awards prizes to first, second and third place winners from the contest and in addition, prizes also awarded in special categories. This money helps companies to run business without offering equity.

SBA Loans

SBA Loans, which is known as Small Business Administration Loan, these types of funding are received from the government administration who are devoted to assist the small business to achieve their goals. It mostly helps and backed the small business. The most important thing about these types of loans is, they don’t come directly from the SBA you have to find a local lender who provides SBA loans in order to receive the funding.