If you have already secured funding for your new product or service, then it won’t be worthwhile reading this. For those who may be considering obtaining finance from various organisations such as banks, small public business lenders, venture capitalists and so on, it may be valuable to consider some of the pointers below.
Funding for startups is not easy but you know that. The main reason is because most lenders want a sure thing – they want return on their capital loaned.
Small business start-ups are risky and this accounts for one of the main reasons why funding is so difficult to obtain. Yes, you get radio talk show hosts who are self-styled small business exspurts and their gooroo guests who want to find blame and point fingers at certain institutions concerning their lending policies for small business.
Be realistic you won’t get a loan easily for a startup. No matter how hard you beat your fists against the wall and complain the hard-nosed capitalistic approach is reward and return. It’s a principle that has served many people, many countries, many institutions and for many centuries.
If you take the banks, for example — and we don’t want to be unncessarily unkind to banks — they they want guarantees. These guarantees will come in the form of signing away your assets in the event of you being unable to pay your loan.
No matter how unfair you think this is, the banks want their loan money back. You can accuse banks of having palatial headquarters where they these days serve cold sparkling water out of the water cooler and employ so many people that they are tripping over each other in the lobbies. It doesn’t matter, the real thing here is that banks are in it for the money and they will not accept any risk.
To widen your thinking, the next layer of institutional funders are our organisations or agencies set up to loan money to small businesses. However, in these organisations you will find political agendas at work. If your business idea, product or service doesn’t fit with their ideology, you won’t get alone. It’s a simple as that.
So if your product or service aligns with the political agendas and ideologies, then you may stand a chance of your startup being considered for a loan.
Private companies aren’t really into funding startups unless there are specific reasons and special circumstances. These days there is a calling for public companies to support enterprise development but start-up funding instances are not the norm. You’ll find that very large corporations would buy startups or buy a stake in startups but then the startup would be already running and proving itself with its product, service or technology.
We could go on and on into various sources of funding but let’s just say that if you are faced with a funding wall and cannot move further, you may have to consider bootstrapping. This is where a cash kitty built up over years or funding from family and friends may be the only help that you’ll get.
That’s the reality of commerce.
It’s the reason why many entrepreneurs have to put their own skin in the game and fund their startup themselves. But if you do qualify for certain types of funding for startups why not try – you’ve got nothing to lose, unless you are forced to sign away your assets.