5 Ways To Finance Your Tech Startup - TechGeek365

5 Ways To Finance Your Tech Startup

5 ways to finance your tech startup

What was the reason you decided to start a tech company? There are many that could have sparked this idea including wanting the freedom of being self-employed, wanting to be more successful, having a great idea that you know could work, or perhaps even financial reasons. Whatever it was, if you have decided to build a startup, or if you have begun the process already, funding is going to be something that you need to consider very carefully. When you start a business, it will always be an easier thing to do if there is some money already allocated to it. Therefore, understanding how you intend to finance your business is essential. What are your options?

Business Loan

The first thing that many entrepreneurs think of when it comes to financing their new business is a business loan. This can indeed be the best way to go about things, as the interest rates tend to be lower than with other forms of borrowing, plus you will know exactly how long you must pay back the debt, and exactly how much you will be paying per month. However, in practice getting a loan like this isn’t always possible, especially if you only focus on high street lenders. A bank will have strict criteria for lending, and if you have poor credit then you might not be able to borrow.

If this is the case, then search around online to find loans with no credit check. Although the interest rate will generally be higher, you can more easily borrow the money that you need. You should only do this if you know you can service the debt, of course, otherwise you can find yourself in financial difficulties from the start.

Your Savings

If you would prefer not to borrow at all then you can use your own personal savings to finance your startup tech company. Some people are nervous about investing all of their hard earned savings into their company, which is why they might seek alternative methods even if they have the money, but if you have a solid idea of what you are doing and have researched the industry, and if you have a full business plan that makes sense of the figures and shows where you are heading, then it does make sense to use money that you already have. If your calculations are correct, you will get that money back when the business starts making a profit anyway.

To make money in this way, you can make a loan to your business and include a specific interest rate in the terms of that loan. That way, not only will you get your own original sum of money back, you will get additional money besides.

Remember, however, that if you use all your savings and still need more money in your business to help it to start make a profit, then you will also need to look at other methods of funding. However, this shouldn’t be so much of an issue at this point, as you will be able to show that the business does work, plus you won’t already have borrowed any money so lenders will look more favorably on you and your plans.

Borrow From Friends & Family

Borrowing from friends and family is another alternative way to fund your business. It can be the best idea for those who can’t borrow from other sources, and who don’t have any money put aside. If you do decide to use this method, then it should be more formal than simply asking for money and promising to pay it back when you can. You really should draw up a formal contract, which sets out the terms of the loan and includes interest and a repayment structure. Not only will you then know exactly what you are meant to be paying back and when, but the person you borrowed the money from will also be able to guarantee a return on their investment.

Angel Investor

In order to get the most out of the money you are borrowing to fund your tech startup, you might consider obtaining an angel investor to help you out. An angel investor is a person or group of people who invest their own money into a business so that it can start or expand. They do this to make a profit, so they will have a vested interest in seeing the business succeed. In many cases this means that they will give advice or even help within the business to ensure that this happens. In return, angel investors will have shares in the business, and what percentage they take will depend on how much they invest, and how much the business is worth.

Bringing someone on board who has the relevant business experience can really help your business, especially if you have never run one before, so this can be a good option for many. To attract the right investor, you will need an accurate business plan to prove to them that your business will make a profit.

Crowdfunding

Crowdfunding is a relatively new phenomena compared to the other methods of raising finances for a business that we have mentioned, but it could be an ideal one for your tech company. When you start a crowdfunding campaign, the first step is to choose the right platform to host it. There are many different crowdfunding websites around, and many specialize in a certain business arena, so one that focuses on tech is a good idea because you’ll know that the people who are looking to invest will understand what your business is all about.

When you are crowdfunding, you will also need to know in advance how much money you need and exactly what you need it for. You might raise more during the campaign, and that is certainly a bonus, but remember if you don’t raise enough then you won’t be able to have any of the money.

Mohammad seeks to shed light on the corporate and financial side of tech firms while analysing the sector as a whole.

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