The issue of where to obtain funding is always critical, whether when starting your business or when seeking to grow your business down the track.
Most start up businesses such as young designers have to rely on personal savings to get their businesses up and running. Others may rely on government grants, scholarship money saved during university or fund their businesses from working other “day” jobs, such as waiting tables or working in fashion companies. Beware of using personal credit cards the owner of the card remains personally liable to pay the relevant card company back.
If I don’t have any savings, what are my options?
There are various stages and types of funding that businesses need, based typically on whatever stage they are in there growth and life cycle of a company.
At the beginning, if you are fortunate, you may be able to raise what is known as “friends and family” funding to get you going.
As the business begins to grow and shows signs of success, you may be able to attract further capital from “HNW’s” or even obtain “VC” funding.
Once the business has taken off and further growth depends upon receipt of more serious and targeted funding and also management assistance, then you may be ready for “PE” funding.
At some stage along the way, if you are lucky, you may also be able to raise funding via debt, or, in other words, take a loan from a financial institution such as a bank. Loans can be structured in many and various ways including personal loans, revolving credit facilities and perhaps overdrafts.
Be careful about giving “PGs” or “personal guarantees” which may be unavoidable early on but should – whenever possible – be resisted.
What is “friends and family” funding?
“Friends and family” funding is perhaps the most typical type of funding for early stage businesses. As the title suggests, it involves being loaned cash by your parents, friends and other family members. Often there is little expectation that this sort of funding needs to be paid back, but that may not always be the case and always be sure to record the terms of any loans or gifts in writing.
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