Have you just started your own business? Do you want to expand your company and need financing? Whatever the situation you have, you should know how to get money for a company and take into account the different channels that will help you develop the idea you have in mind. In this article we are going to give you some tips that may be of great interest to you, whether you are an entrepreneur with just one project in mind or if you already have a company created and can present numbers to potential investors. Read on and discover how to get the money you need for your business.
Who will give me money if I am an entrepreneur?
Obtaining financial resources is one of the most important challenges that entrepreneurs face when they decide to start and grow their business proposal. There are several sources of financing that you can use:
- Financial entities
- Investors from their own environment (family and friends)
- Quick loans
- Business Angels
- Professional investors
- Go to the capital market with your IPO
Depending on the type of investment source you select, you will have to follow a series of steps or others in order to obtain the money you need to get it. Below we are going to treat them individually so that you can assess the pros and cons of each one and choose the one that best suits your needs.
Get money from a financial institution
Financial entities lend their money to companies and entrepreneurs with low risk and with collateral guarantees, seeking recovery through periodic installments that include a part of interest and another of the principal. However, many innovative firms, particularly those recently established, do not meet these criteria and the financial institution usually denies them the requested financing.
The business of banks consists of capturing deposits from their clients to later lend them to other clients, their profit being the interest margin generated in the process, requesting collateral guarantees and tangible assets that ensure the repayment of the loan.
A financial instrument located between bank financing and equity financing are participatory loans. They are frequently used to finance companies that cannot resort to bank financing due to their high level of risk, but which are potentially capable of generating a return commensurate with said risk.
Venture capital has been established in recent years as an alternative source of financing for small and medium-sized companies, advantageous compared to traditional financing provided by financial institutions since it is willing to participate in operations that cover a wide range: from first phases until its expansion phase, going through the restructuring of the activity and even supporting an internal or external manager to gain control of the company. They use their own funds instead of debt, which improves the image of the company that enables subsequent financing through debt and provides an intangible value thanks to their experience, contacts, etc.
Receive money from Venture Capital
The entrepreneurs or entrepreneurs with innovative ideas and an economic potential high, are struggling to meet their financial needs through traditional channels, due to factors such as uncertainty, asymmetry of information or the nature of their assets, so Venture Capitals are presented as a suitable alternative.
Among the “professional investors” we will place “Venture Capital”, this group includes two clearly differentiated types of activities and we will express them by their terminology in English “Venture Capital” and “Private Equity”.
Self-financing or family
Ultimately, you can also resort to self-financing, that is, it is the way in which we will finance the company with our own capital. This model works in projects with low capital requirements and in “Lean Start up” companies that spend little.
You can also look for financing in the people around us, in this case financing based on trust in the person is sought. It is not highly recommended to do it with only relatives since in these cases you can have an excess of confidence; In order to do this in a transparent way, we recommend that you read our article on how to borrow money from a friend.