Have you just started your own business? Do you want to expand your company and need financing? Whatever the situation you have, you should 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 advice that may be of great interest to you, whether you are an entrepreneur and only have a project in mind, or if you already have a company created and 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 that entrepreneurs face when they decide to start and grow their business proposal. There are several sources of financing to which you can resort:
- Financial entities
- Investors from your own environment (family and friends)
- quick loans
- Business Angels
- professional investors
- Go to the capital market with your 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 achieve it. Below we will treat them individually so that you can assess the pros and cons of each one and choose the one that best suits your needs.
Get money from a financial institution
Financial institutions lend their money to companies and entrepreneurs with low risk and with collateral guarantees, seeking recovery through periodic installments that include part interest and part principal. However, many innovative firms, particularly newly formed ones, do not meet these criteria and are often denied the financing requested by the financial entity.
The business of the banks consists of capturing deposits from their clients to later lend them to other clients, their profit being the interest margin generated in the process, requesting collateral guarantees and tangible assets that ensure the repayment of the loan.
Participative loans
A financial instrument located between bank financing and equity financing is participatory loans. They are frequently used to finance companies that cannot access bank financing due to their high level of risk, but that is potentially capable of generating a return commensurate with said risk.
Venture capital has been established in recent years as an alternative source of financing for small and medium-sized companies, advantageous compared to the traditional financing provided by financial institutions since it is willing to participate in operations that cover a wide range: from first phases to its expansion phase, going through the restructuring of the activity and even supporting an internal or external manager to gain control of the company. They use their own funds instead of debt, which improves the image of the company enables subsequent financing through debt and provides intangible value thanks to their experience, contacts, etc.
Receive money from Venture Capital
Entrepreneurs or businessmen with innovative ideas and high economic potential have difficulties meeting their financial needs through traditional channels, due to factors such as uncertainty, information asymmetry, or the nature of their assets, so Venture Capital are presented as a suitable alternative.
Within the “professional investors” we will place ” Venture Capital “, this group includes two clearly differentiated types of activities and we will express them by their terminology in English “Venture Capital” and “Private Equity”.
Self-financing or family
Ultimately, you can also resort to self-financing, that is, it is the way in which we will finance the company with our own capital. This model is useful in projects with low capital needs and in “Lean Start-up” companies that spend little.
Financing can also be sought from the people around us, in this case, financing based on trust in the person is sought. It is not highly recommended to do it with only family members since in these cases you can be overconfident; In order to carry out this process transparently, we recommend that you read our article on how to borrow money from a friend.
