Every year, many companies get shut down overnight due to the financial crisis. In any economic climate, finding finance is a very challenging job. So, whether you are looking for the fund for your startup, capital to expand, or financial help to pass through a rough patch.
To help you deal with your professional or personal funding requirements, here are 6 financial techniques.
One of the safest and easiest ways to finance your own business is to utilize your own money. In this competitive world, it is really important to save money for rainy days. Saving money is conventional but the wisest decision you can make is to fund yourself or start your own company.
The only problem here is that you have to deal with limited money to fund your business. Some businesspersons are daunted and take money out of their homes-home equity line of credit, insurance policies, and retirement plans and utilize that fund to drive their businesses.
It is indeed a little risky solution; if in case, your business suffers failure or downfall, then you lose your house, insurance, or insurance plans. For this, you can surely utilize your savings but never consider your insurance or retirement plans.
The method of finance where a company sells discounted receivables to get cash straight away is called factoring. Generally, it is used by financially deprived companies with credit or by businesses such as apparel manufacturers that fill out orders prior to getting paid. However, factoring is an expensive way to raise funds.
Companies that sell receivables have to pay fees that equal a fair share of the total amount. For instance, if you pay a 2% fee to receive funds at least 30 days in advance, it is equal to the annual interest rate, i.e., 24%. This is why factoring had a bad reputation in the business over the years. With that being said, economic crises force companies to turn to alternate options.
Moreover, companies like The Funding Company offer their receivables to many factoring companies at once. These moneylenders will bid on the invoices that are to be sold in a bundle or at a time. For more, you should explore the TFC funding process in detail.
3. Crowd Funding
Crowdfunding can be an effective way to raise money for a project that is a relatively low-cost and creative project. You will have to set a goal for the amount you want to raise over a particular period say – $ 1,000 in 30 days. Anyone that you know, your family, friends, and sometimes even stranger can use the website to initiate money.
Generally, the project creators facilitate the money-raising process by offering incentives for pledging, say- if you give away $15 to a writer, you will get a book as a return gift. Also, remember that there’s no long-term return on the investment for supporters. You can use the Go Fund Me or a gofundme alternative to get started.
4. Credit Card
Another very risky method to fund your business is using your credit cards. It comes under an unsecured personal funding service where your credit score is a representation of your ability to pay back the debt. Your credit score will get exhausted as soon as you fall behind on your payment. If you think that paying just the minimum each month is enough, then you surely are getting yourself trapped in an endless loop that you are never going to get out of. However, for infrequent jams or for extending your payable duration to shore the flow of cash, credit cards are a considerable option.
5. Angel Investor
While you pitch for an angel investor, all the conventional rules are still applicable. Those golden rules are- to be succinct, avoid jargon, and always have a strategy to exit. If you want to learn how to win over investors you should check out SketchDeck’s guide to writing a great pitch deck. There’s some really helpful information in there. The economic downturn and turmoil have surely changed the financing game. Here are some tips that can attract Angel investors for personal funding requirements:
- Add Experience: To attract Angel Investors, you would want to employ an experienced person on your management team that eases out the fears of investors about your company’s ability. The highly experienced advisor is surely an add-on to your company’s credibility.
- Never Try to be a Fad-follower: You should always invest your time and money in building a startup if you are passionate about it. Angle Investors are very insightful when it comes to judging who to invest with.
- Know your Stuff: If you keenly want Angel Investors to invest in your business, then you are required to keep yourself updated with a competitive analysis, complete market assessment, and impactful marketing and sales plans for your business. This is one of the critical ways to lure Angel Investors hence, always do your homework properly.
- Keep in Touch: The economic world can turn upside down anytime and anyone can need investors. So, it is possible that Angle Investors may not pay much attention to your interest right away, especially when you are not a successful business anymore. Hence, formulate a way to combat keeping up with them for fulfilling your personal funding requirements.
6. SBA Loan
With the rise of economic crises, banks might become reluctant to take risks with their money. There come SBA microloan programs to the rescue. SBAs are lesser-known, but extremely helpful microloan programs. They are capable of providing business loans up to $50,000.They use intermediaries to fund the loans over direct funding.
These intermediaries are also known to provide management assistance. They may or may not require training as a condition for a loan. The advantage here is that their training and assistance often increase your success rates. All in all, it is a great program for entrepreneurs who need capital to operate their businesses.