Factors to consider when seeking Business Financing
When seeking funding for your business, you'll inevitably come across many different options. But there are a handful of essential factors to consider when determining the best fit. Here are some of them:
What is the expected return?
This is perhaps the most basic of all questions. Why ask for money? What do you look forward to receiving in return? To make sure your business has a reasonable chance of success, you need first to determine what the returns will be. If you're looking for $1m in funding, then a 5% ROI and 50x profit may not be realistic. So the first step is determining what your expected return will be.
What is the amount of risk involved?
The next step you need to look at is how much risk you're willing to take on. Crowdfunding, microloans, etc., all come with their degree of risk. Typically, there are two types of investments: high-risk and low-risk. High-risk investments usually have a higher return but involve a lot more risk.
Be honest with yourself; ask whether or not you're willing to risk your capital on such a high-risk investment. It's important to remember that although it may be tempting, every investment opportunity is not suitable for everyone.
What is the purpose of the funding?
Depending on what sort of business you have, you may find certain types of funding that are more beneficial than others. For instance, if you're planning to open a cafe, a start-up loan or microloans could be ideal. However, if you're seeking someone to invest in your company for a more extended period, then venture capital or private equity might be better. Provided you do your research; you'll be able to figure out what type of funding will work best for you.
What kind of investor are you seeking?
The final question you should ask yourself is what type of investor are you looking for? Do you want a relationship with the person who's funding your project? Or are you just looking for an investor who can provide capital without getting much involved? There's no right or wrong answer to this. It's just a question that you need to ask yourself. Once you've figured out the above questions, you should be able to find a funding option that works best for your business.
What's the Current Status of your Business?
The current state of your business will inform how you approach this decision. If the company is in its infancy, it's not too late to start a crowdfunding campaign. But if the business is already fully launched, you might want to consider other funding methods such as venture capital or angel investors. Suppose you are interested in pursuing crowdfunding as an option. In that case, it's essential to understand what kind of company and type of product will resonate with the public and help receive funding from people that share your values.
It's important to remember that there is no one-size-fits-all solution for business funding. You should carefully decide which avenue will work best for you, and you should do so with your own goals and ambitions in mind. Once you've picked an option, aggressively pursue that opportunity. Funding your business can be a complicated process, but it can have a huge payoff down the road if done right.