Starting a project comes with various hurdles, and finance is the most crucial. Whether you are a tech-savvy person, engineer, or just somebody with a grand idea for a project, you would need funding. This funding is mainly the major part of product development and R&D.
Funding your project at any stage, be it development, prototyping, or manufacturing, requires a vast
knowledge of funding types and how they apply to each stage. Irrespective of the type of project you want to undertake, a little funding takes a long way, especially in the early days. But the good news is there are many ways to finance your projects or business ideas.
The major sources of finance for most projects include loans, equity, grants, investors, and private finance. There are many ways to get funding for your project, and in this article, we will be highlighting 10 of them.
10 Ways to Finance Your Project
There are different ways to get funds for your project. Most startups seek funds to get off the ground, especially in the early days of their business.
Here are 10 ways to finance your projects.
Put all your savings, profit from sales, and other investments to kick-start your business. Funding your business through bootstrapping is beneficial, especially in the early stage, gives you control over your business, and erases the worries about monthly repayment of loans and interests.
It is the quickest way to get funding for your project. However, this depends on the type of business you’re building, the capital requirement, and total personal funds. While you might not be able to use money gotten from Bootstrapping for full-scale manufacturing, you can use it for small 3D printing and prototyping project.
2. Bank Loan
If you have been in business for several years and have a good credit score, many traditional banks are willing to give small businesses and startups loans. These loans come with competitive terms and a low interest suitable for a small business project.
Most banks do not fund projects at the idea stage. According to recent data, projects at the manufacturing stage that have been operational for a certain period with high growth potential easily get a conventional bank loan or SBA loan.
Angels usually have established business professionals. They are private investors, and their motive for investment ranges from equity stake to board membership. They have a high net worth and are often looking for avenues to invest in projects with prospects. Known to invest huge sums, you typically get investments worth $10,000 upwards.
They provide finance at the early riskier stage of product development. Also, Oecd.org notes that they tend to invest in the form of networks and groups. This makes them ideal if you are seeking funds for prototyping and product development.
Asides from the financial benefits Angels afford you, they could also serve as a source of useful knowledge regarding the project you want to undertake. Also, Angels have connections and could provide you with good networking opportunities. The fact that you might end up paying as much as 10 times their initial investment. This repayment occurs inside their initial 5 to 7 years.
To locate Angels, you can either ask other entrepreneurs in your circle or visit Angel Capital Association or Angel. These websites help entrepreneurs as you connect with investors interested in your project.
4. Venture Capitalists
Also known as VCs, these capitalists offer over $100k to companies and startups. Known for their patience, VCs stay with you for a long period, 10-12years. This time span covers the funding, investment maturity, and exit. To get funds for your project from Venture capitalists, you need an in-depth business plan. The price of their investment is equity share and involvement with the business on a strategic level. They help your business grow to increase its value so they can sell their shares for a profit. Venture capitalists help provide funds for full-scale manufacturing.
To meet venture capitalists, you need an introduction from other entrepreneurs or investors. This means taking advantage of your contacts and network. Also, you can visit the National Venture Capitalist Association website and sell your project idea to the ones you connect most with.
If your project has significant growth potential, from the prototype or from the speed of its development, you should consider seeking funds from venture capitalists.
5. Business Accelerators
Business accelerators offer professional advice, guidance, and funds to startups. Accelerators hasten the process for startups, turning business ideas into prototypes or products in a very short time. Business accelerators provide businesses with access to mentorship, investors, and other forms of support. Their main aim is to make your business stable and self-sufficient. According to bdc.ca, an accelerator program runs from two to six months.
All you need to access funds from accelerators is to provide a good project idea. They raise funds for your project and expertise that can demonstrate your project idea. Accelerators focus on rapid growth and successful product launch, making them suitable for entrepreneurs that want to reduce the time to prototyping, production, and marketing. In return, business accelerators will also want an equity stake in the new project.
A grant is a financial assistance given by the government, private businesses, or corporations. Several corporations and government agencies provide grants to fund your project, which does not require repayment. According to oecd.org, grants and subsidies provide solutions to financial challenges most R & D intensive and technology-based enterprises face in the early stages of development.
Grants normally become available when a government agency or corporation sets aside funds for an area of concern. The challenge with acquiring grants is that it takes a lot of time to get them since many people apply for the same grant. Also, you have to provide documentation, including your reason for applying for the grant and your product or service.
7. Money from Friends and Family
Family and friends could be another source of capital for your project, although asking them could be a daunting task. However, it is often better to ask those closest to you to fund your project before seeking external funding.
It is important to note that having a project plan ready is necessary before you ask family and friends for financial assistance. This would help you answer any questions they might raise regarding your project. You should also be able to tell them if they would get their money back once the business is up and running and how much they should expect.
8. Consult Your Local Small Business Development Center
If you are looking for funds to finance your project, you could visit your local small business development center. These centers are present in high institutions and have information regarding where you can get local funding for your project and how to fund your project. They serve various purposes, including connecting you to other entrepreneurs and networks. They could also connect you to angels. Your local business development center could also help you determine the type of funding or loan your project qualifies for and help you apply for them.
With this type of funding, a crowd raises the financial resources you require to kick start your project rather than one or two major investors. Running a successful crowdfunding campaign requires a project that services the need of a large number of people. You have to convince people you have a project worth their investment in crowdfunding.
Crowdfunding is ideal for prototyping customer products because you interact with the target market in the process. This also means you receive immediate feedback on your prototype.
There are four major types of crowdfunding, and they include:
- Donation: In this type of crowdfunding, people give towards your project and expect nothing in return.
- Debt: This is a type of donation where the money given is a loan that you repay with interest. This type of crowdfunding also comes with a deadline
- Rewards: Here, donors receive a reward in return for their donations. The size of the reward depends on the size of the donation. The reward serves as an incentive to the donors. The reward could include gifts or services at a discounted rate.
- Equity: Crowdfunding here serves as an investment as donors receive business shares based on the amount of money they contribute. In this type of funding, you are giving a portion of your business away to the donors.
10. Commercial Mortgages
This is money needed to buy property or land for business activities. You can use this fund to purchase a commercial property: office space, factory, restaurant space, or retail space. This fund also covers construction costs if you cannot find a building that suits your business needs.
This type of fund is ideal for entrepreneurs who want to expand or upgrade their business premises. To apply for commercial mortgages, ensure these records are up to date; recent bank liability and asset statements record, performance figures (projected and current), Tax returns (For a period not less than three years), and details of your directors and partners.
This type of funding is suitable for projects or businesses at the development or manufacturing stage.
Getting the funds for your project should not be a difficult process. There are several ways you can fund your project, which sometimes depend on the project stage. Some funding types require a project still at its idea stage to provide a prototype of the project, while some need it to be at the manufacturing stage.
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