InvestingBytes.com

Sourcing funds to get a start-up running is the most common problem faced by many new businesses. Instead of focusing on a single financial source to take care of all business needs, diversifying, and looking for varied alternatives helps a business to efficiently source funds. This, in turn, would help a start-up to weather through any potential downturns that may occur at the start of a business, as well as get the best interests on sourced funds. The traditional banks are only one of the potential financial service lenders available in the market. The strategy to source funds from varied channels portrays a business’s efficient financial skills.

Every financial option available for funding a start-up business is distinct in its own form. Some of the most common sources of business finance are as follows:

Personal funding
This is a common type of funding where the business owner is the first investor into their start-up business. These funds are either available as ready cash or dispensable assets. When a fraction of the funding is from the owners themselves, the bank and other financial institutions fast-track their sanction of funding on their view of the owner’s good faith and long-term commitment.

Patient capital
This is the funding that a business owner sources through friends and family, which will be repaid at a later date when the business has reached a stable phase. Sometimes, the money is a form of equity ownership granted to the fund provider, thereby allowing the friends and family of the entrepreneur to gain returns on their investment.

Venture capital
This form of investment from third-parties is general in the technology-driven businesses that have high returns in the future. This funding option is not for all entrepreneurs as the venture capitalists usually get higher stakes in the form of a substantial ownership agreement. Moreover, they are pass-through funders who might engage in selling stocks in higher investment portfolios.

There are also other options like angel investors, business incubators, government grants that are available for certain types of businesses. Getting a financial advisor can help you navigate through these options for sourcing the best funding option.