The Ideal Financing Options Every Tech Startup Should Consider

Got a Great Idea for a Tech Start-Up?

There are times in our life when we have a great idea and are interested in starting our own business. You can see yourself reading the next tech business and are ready to be the person to innovate something that could help the world. It all boils down to getting the financing for it. Here’s an overview of different options you can choose to meet your needs.

Non-profit Local Community Development Financial Institutions

Today there are many institutions that support tech startups locally by providing capital to small or micro businesses on reasonable terms. These institutions are aware of the struggles of capital that a startup business needs to start, thrive, and grow. Research on local options available for your business and present your plan to them. After careful scrutiny, if you have a viable business idea you are sure to get a loan from them. These are not traditional banks so their process is easier.

Non-Traditional Loan Lenders

When planning the finance of a tech startup, not only do you need to raise the money to hire people and set up the company but there is another big investment needed. Every startup has to find a loan for equipment finance, as this is usually the biggest chunk of finance needed. If you have a bad credit score, getting a loan from banks will be harder. Several e-lenders offer business loans even with a low credit score. They take into consideration factors other than bad credit.

Venture Capitalist

This method too has gained a lot of popularity among startups. Venture Capitalists are a group of people that take a share in the startup in exchange for financing the capital. Their percentage of ownership is agreed upon between both parties after checking the valuation of the business. Your eligibility for this kind of loan depends upon demonstrating high potential growth and a competitive and innovative edge. Apart from financial assistance, this method can also help provide you an introduction to the industry and direct you towards success. 

Invoice Factoring

With invoice factoring, a service pays you money in your outstanding accounts receivable and then settles the debt with your debtors by taking a small amount as commission. For example, if you are owed 5000 Dollars, the factoring companies pay you the amount after deducting a 10-15 percentage (depending on them) and takes the full amount from the debtors. This helps small and micro businesses have a constant cash flow while you wait for your 

Crowdfunding

There are many crowdfunding platforms available that can give a financial uplift to startup tech businesses. On such platforms, a startup can pool small investments from several investors instead of one single investor. By using this method, you can raise the needed capital to start your business and take it till the development phase. Once that is achieved, you can then pitch your business plans to other investors on terms that are more agreeable for you. Also, bigger investors do not prefer taking risks at the initial stage and crowdfunding gives the option to small investors to fund. 

Marketplace Lending

Marketplace lending or peer-to-peer lending means raising capital by introducing borrowers and lenders on online platforms. There are websites where the borrower creates an account and makes a pitch by putting up the profile of their tech business idea. It provides all information of transfer and records of the borrower to see how the startup is developing. When lenders are interested, they can connect with the borrowers and agree on terms to finance their start-up. 

Family and Friends

This is always a good option to consider. Many times your family and friends can consider giving you a loan as they believe in you and trust you. By presenting them your business plan, its development, and progression path, you might raise curiosity among people you know and who are keen to help you out or are looking for an investment option themselves. A good legal agreement that assures both parties a safety net will help seal the trust in their investment towards your tech business startup. 

Keep Your Day Job

This is advisable if you have a day job that is meeting your expenses and allowing you to live a comfortable day job. Though it may seem tempting to dive into your startup, take some time to set your path properly to achieve your business dream. You can spend more time developing a good plan and strategically going through the financing and development phase rather than being stressed about paying your bills. You can stay true to your vision and also get more experience from your job on how to run a business more effectively. 

Stay Motivated on your Course of Action

Getting the necessary financing for your startup can be very frustrating and can easily take up a lot of time than you expected. It involves building a network of people around you who believe that your commitment is serious. By working on your business plan consistently you will be able to form a network of investors to whom you can pitch your plan and get the necessary help towards funding your business. Though it will be difficult, by being as precise and innovative as possible, you can surely reach a successful stage. 

If you are facing a lot of rejections from investors, chances are you either don’t have a solid plan or you are approaching the wrong investors. Research thoroughly the profile of the investors to see if they have previously invested in like-minded people like you. 

Staying motivated is going to be the biggest factor to achieve your dream start-up. Be more prepared to face rejections but stay motivated to go on ahead. This will create a strong backbone for your future business. By keeping your expectations low, rejection will not overwhelm you. Take rejection too as a part of your business approach as even after you have successfully started your business there could be a time that you may face some losses. 

By following all or some of the options available and a motivated mind, you are sure to find financial funding from or the other.

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