Capital Funding - How Do You Find Funding For Your Business?
When you want to start a business or want more funds to sustain an existing one, you look for financiers who can provide the required money and give a boost to your business. You have several options when you seek financing. For one, you can always approach banks and traditional finance institutions. If you have a strong business plan and adequate documents to support your claim of expertise, you can get funding from these sources. Another option you have is to look for venture capital funding specialists or companies.
What is the difference between capital funding and taking business loans from banks?
There is a huge difference between capital funding and taking loans for your business. When you take a loan, the financier becomes your creditor. The financier's presence in your business closes as soon as you repay the loan. Capital funding companies, on the other hand, could have a prolonged presence in your business. Since they contribute capital, they usually become partners in your venture.
The main difference lies in the ideologies of capital funding companies and creditors. When creditors lend you money, they expect you to return the principle amount and more money in terms of interest calculated throughout the loan period. Capital funding companies seek long term returns. They are less interested in getting their money back and more interested in receiving a continuous source of income in the form of a share of your business profits. In the long term, you might end up sharing a good part of your profits with capital funders. So, before you choose either a bank or a capital funding company, you need to be aware of these implications.
The stages of funding
On a broad basis, capital funding can be divided into four stages. The first stage is called seed funding. This is the stage in which you business is still just an idea. You have not developed a product or registered a company yet. When you need money for developing a product, you look for seed funding.
The next stage of capital funding is the startup stage. This is when you have a company but need money to take your products and services into the market. You could also seek startup funding to further develop and fine tune an existing product.
The third stage is when your product is in the market but you need funds to turn a profit. Capital funding companies fund the early stages of your business and support you till you start showing returns.
The fourth stage is called late stage funding or mezzanine funding. This fund is not aimed at helping you launch a business. Rather, this is aimed at business development. You could ask for mezzanine funding if you want to expand your business to further geographies, introduce new products or implement some strategy to make your business bigger.
How to obtain funding?
In order to obtain funding, your business needs two qualities. First, it needs to have a strong idea. Second, it needs to have good market viability or acceptance.
Approach different capital funding companies and make a positive impression so as to obtain finance for your venture.
What is the difference between capital funding and taking business loans from banks?
There is a huge difference between capital funding and taking loans for your business. When you take a loan, the financier becomes your creditor. The financier's presence in your business closes as soon as you repay the loan. Capital funding companies, on the other hand, could have a prolonged presence in your business. Since they contribute capital, they usually become partners in your venture.
The main difference lies in the ideologies of capital funding companies and creditors. When creditors lend you money, they expect you to return the principle amount and more money in terms of interest calculated throughout the loan period. Capital funding companies seek long term returns. They are less interested in getting their money back and more interested in receiving a continuous source of income in the form of a share of your business profits. In the long term, you might end up sharing a good part of your profits with capital funders. So, before you choose either a bank or a capital funding company, you need to be aware of these implications.
The stages of funding
On a broad basis, capital funding can be divided into four stages. The first stage is called seed funding. This is the stage in which you business is still just an idea. You have not developed a product or registered a company yet. When you need money for developing a product, you look for seed funding.
The next stage of capital funding is the startup stage. This is when you have a company but need money to take your products and services into the market. You could also seek startup funding to further develop and fine tune an existing product.
The third stage is when your product is in the market but you need funds to turn a profit. Capital funding companies fund the early stages of your business and support you till you start showing returns.
The fourth stage is called late stage funding or mezzanine funding. This fund is not aimed at helping you launch a business. Rather, this is aimed at business development. You could ask for mezzanine funding if you want to expand your business to further geographies, introduce new products or implement some strategy to make your business bigger.
How to obtain funding?
In order to obtain funding, your business needs two qualities. First, it needs to have a strong idea. Second, it needs to have good market viability or acceptance.
Approach different capital funding companies and make a positive impression so as to obtain finance for your venture.
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