How to get money for a company
Did you just start your own business? Do you want to expand your business and need financing ? You have the situation that you have, you must 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 can be of great interest to you if you are an entrepreneur and you only have one project in mind as if you already have a company created and you can present numbers to potential investors. Keep reading 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 facing entrepreneurs when they decide to start and grow their business proposal. There are several sources of funding you can use:
- Financial entities
- Investors of their own environment (family and friends)
- Quick loans
- Business Angels
- Professional investors
- Go to the capital market with its 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. Next we will treat them in an individualized way so that you value 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 collateral guarantees, seeking recovery through periodic installments that include part of interest and another part of the principal. However, many innovative firms, particularly those that are newly constituted, do not meet these criteria, and usually the financial entity denies them the requested financing .
The business of the banks consists of taking deposits from their clients to subsequently lend them to other clients, with their profit being the margin of interest 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 capital financing is participative loans . They are frequently used to finance companies that can not resort to bank financing due to their high level of risk, but which are potentially capable of generating profitability in accordance with said risk.
Venture capital has been constituted in recent years as a source of alternative financing for small and medium-sized companies, advantageous over the 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 take control of the company. They use their own funds instead of debt, which improves the image of the company that enables subsequent financing through indebtedness and provides an intangible value thanks to their experience, contacts, etc.
Receive money from the Venture Capital
Entrepreneurs or entrepreneurs with innovative ideas and high economic potential, have difficulties in meeting their financial needs through traditional channels, due to factors such as uncertainty, information asymmetry or the nature of their assets. Venture Capitals are presented as an adequate alternative.
Within the "professional investors" we will place the " Venture Capital ", this group includes two types of clearly differentiated activities and we will express them by their terminology in English "Venture Capital" and "Private Equity".
Self-financing or relatives
Ultimately, you can also resort to self-financing, that is, the way in which we will finance the company with its own capital . This model works in projects with low capital needs and in a "Lean Start up" company that spend little.
You can also look for financing in the people around us, in this case we look for a financing based on trust in the person. It is not advisable to do it with only family members because in these cases you can have an excess of confidence; To be able to do this procedure transparently, we recommend you read our article on how to borrow money from a friend.