There are some people who want to start a new business but the main problem is the arrangement of funds. There are many ways in which funds can be arranged for startups but there is a risk that if the business will not work then all the money will be a waste. So before choosing a funding option, one should also take care about the pros and cons of that funding. Here are some options that can be used for funding.
1) Savings Funds
This can be one of the best sources of funds. If the startup owner has his savings, then he can control everything and there will be no dependency on anybody.
Advantage
- The owner can do anything with the money as it belongs to him.
- Since the funds solely belong to the owner, he will be satisfied when using it.
Disadvantage
- All money will be lost on a failure of the business.
- The owner will not be able to get guidance from the investors which can be a great loss for him.
2) Relationships With Family Or Friends
A person who wants to start a business can ask his family or friends for financial support. Through this type of funding, a business can be started and if it succeeds, the business can look for more options for funding.
Advantage
- Fund arrangement is easy.
- Payment methods are flexible.
Disadvantage
- It helps only in the initiation of the business.
- The relatives pay the amount without knowing the actual business plan
- If the business does not succeed then returning money can be difficult.
3) Crowdfunding From Investors
In this type of funding, the owner of the business collects a small amount of money from many people This is mostly done through internet and the owner can have a large sum of money for his business. The owner can connect various people through himself, family, friends, and social media.
Advantage
- The owner can get a large number of investors.
- Business can be expanded due to a large sum of money.
Disadvantage
- The owner has to dedicate himself before results come.
4) Angel Investors
These are the investors who can invest a large sum of money in exchange for some equity shares. These investors can either work individually or in the group. They also see the future prospects of the business before investing.
Advantage
- The owner can get valuable advice and guidance regarding investment.
- The business terms are flexible.
Disadvantage
- The owner may have to leave a little control over his business and permit them to interfere in it.
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5) Venture Capital
These are the investors who invest a large sum of money in the startup company. In exchange, they get the equity shares. When the business is launched among the public, then they get returns on the shares. They also get a return if another company buys the startup.
Advantage
- A large amount of money is provided.
- The investors also help in developing the business.
- This funding helps in opening other doors of success for the startup.
Disadvantage
- The owner has to lose much of his control of the business.
6) Bank Loans
Another best source of funding is bank loans. The owner has to take care of options through which he will be able to pay the loan and interest.
Advantage
- The funding process is easy and quick.
- The owner has full control over his business.
- Various funding options are available
Disadvantage
- The documentation process is long and time-consuming.
- The owner should have the best knowledge for all the options as the choice of wrong options can be a loss for the business.
- The loan must be returned whether the business is successful or not.
