Why the Number of People Wondering How to Smartly Fund Their Businesses Has Increased Considerably Lately

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Over recent years, people’s approach to work has changed. The desire to work a 9 to 5 job has decreased, making room for a more entrepreneurial approach. Many are not satisfied with working for someone else and want to set up their own businesses. And they want to do it smartly. So in order to do so, they need to start with an appropriate entrepreneurship strategy. Ideas are great, but in order to make them happen they must be backed by a solid plan – in this case, a business plan that includes the mission of a company, ways of funding, a business model and many more.

Increasing financial literacy

There is a visible trend – not only among entrepreneurs, of increasing financial literacy. People want to know more and learn more about the ways one can manage money – how to wisely invest, how to make secure from inflation, and how to be able to diversify their source of income, so they won’t be dependent on the one job they have. People are hungry for knowledge. Achieving financial literacy can help avoid making poor life decisions and shield future generations. Especially in an era where with a click of a button, there are unlimited resources waiting for them. That is also one of the reasons why more and more people are thinking about opening up their own businesses – to diversify their source or streams of income.

How to fund your own business?

So how to start? After making a business plan and specifying the goals and the business vision, it’s time to think about the resources, or more precisely – how to fund your own business. There are many ways of doing that. Still, the most common one is to fund the company through a loan. It requires some paperwork and a good credit score, but this type of funding is mostly secure. And it does not require exchanging a part of a business for money – the owner does not get rid of his or her rights. The upside? The interest and potential inability to obtain it.

Crowdfunding and family loans

Another traditional way of gathering the funds, but way less complicated, is a family loan, which is simply borrowing money from one’s family members – with or without interest. It’s an easy and accessible way of funding the business, especially if one does not have a great credit score. Another social way of funding is to use crowdfunding. When people are especially invested in some type of project or a case, they are willing to contribute to its development. They pool together small amounts of money – either in the form of a loan or in exchange for parts of the company, and sometimes even without getting anything in exchange. The idea is, instead of borrowing 100% from one bank, a business owner can borrow only 1% from 100 interested individuals.

Business Angels and Venture Capital

If a business owner is considering more advanced options of funding, these two come in handy. Business Angels are professionals who in exchange for shares are helping the owner develop the business – they not only can fund it but also help with implementing a business plan or choosing the right business model. Because of their experience and connections, the business can quickly evolve and make a profit. The other way of funding is through Venture Capital. Again, it’s a form of investing in new companies that in the eyes of investors have potential. What’s good about these two types of funding is that besides the money, the owner gets the know-how and much-needed feedback – but the price is giving up a small fraction of a company each time.

Jeff Campbell