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How do people fund startups?

Start up


Are you looking to start your own business? Many people have dreams of starting their own company and it can certainly bring many perks and be incredibly rewarding, but people are often hesitant because they are not sure on how to go about raising the capital necessary to cover the startup and ongoing costs.

Here are a few of the best ways that you can raise funding for a new business venture.

Family & Friends

One of the most common ways to raise money for a startup is to borrow money from friends and family. It is friends and family that often believe in you the most and for those that do not want to take out a bank loan, this can be a good option, particularly with equity release being an effective option for a way in which a loved one can help someone financially to start a new business as you can receive a significant amount. You need to be careful when borrowing from loved ones as it can change relationships, so you may want to draw up a repayment plan that you are both happy with and keep them informed on developments.

Savings

Of course, savings can be a good option as you may prefer to use your own money rather than be in someone or an organization’s pocket and you will not have to give away any equity. While personal savings can be an effective way to fund a new startup, there are obviously risks attached to using your own personal savings as there is no guarantee for success.

Loans

If you would rather not borrow money from loved ones or use your own savings (or you need additional funding) then traditional bank loans are highly common. This can be a great way to raise large sums and you do not have to give up any control, but you must always do your research and make sure that you find the right type of loan as well as terms and interest rates that will be manageable. It can also be a lengthy process in many cases.

Grants

It is always worth looking to see if you qualify for a research and development grant which is the Government’s way of reading creative and innovative companies. The grant usually comes either as direct cash or a reduction in tax liability, plus as a grant you do not have to pay it back. While grants can be a fantastic source of funding, there are many conditions that must be met so it will not be an option for many.

These are a few of the main ways in which you can secure funding for your startup, all of which have their own benefits but must be carefully considered.



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