Aveneu Park, Starling, Australia

Importance of Involving and Financing of Startups in Small Business

In today’s scenario, involvement and financing of startups have become the need of the hour. Every one knows that no business can grow without adequate funding, but unfortunately only a handful of people are aware of how to approach the investors and lenders at the earliest stages of the business. In case of an emerging business, lack of proper preparation on the part of the entrepreneur can be the greatest setback. In fact, most of the companies which are floundering in the market have never received any financial help from any one. This was primarily due to the lack of a sound business plan, which could be a crucial factor for a successful business.

Therefore, the need of the hour is to take up the support of a reliable and experienced business mentor, who can impart essential knowledge and wisdom, on the subject of business. This would prove to be an important step towards involvement and financing of startups. This would also provide the entrepreneur with the much needed confidence and readiness to undertake the venture. Moreover, it can give a new direction to the business, which might otherwise have been doubtful.

Any business requires preparation, and for this, it is essential to chalk out a business plan. This can be prepared by engaging the services of professionals for the same. There are many entrepreneurs who prefer to take up formal training for this purpose. This is because it is a prerequisite for funding and investment in any startup. Moreover, a formal course in preparation of the business plan will provide much-needed guidance and understanding towards the intricacies of the very crucial section of the business.

For funding and investment in startups, it would be necessary to approach angel investors and corporate investors. These sources of capital offer higher interest rates than other sources. Since they are unfamiliar with the details and workings of the business, they may not offer the required capital amounts, but their motivation and enthusiasm towards the project would surely ensure that the capital is utilized constructively. Further, due to the high stakes involved, these investors may be more inclined towards providing significant amounts of investment that may help in shaping up the business.

The sole source of startup money is personal savings. For this purpose, the young entrepreneurs may have to undertake a credit union with a local credit union. This would require regular deposits in the form of dues paid into the account on a monthly basis. In case they find it difficult to maintain the minimum required deposits, they may have to opt for secured loans from banks and other lending institutions. For startup costs, it would be essential to bear in mind that in today’s economy, even banks are facing a lot of trouble in providing credit.

In terms of finding investors and lenders, it would be advisable to take help from the internet. Most websites dealing with investments in startups advertise their services on the web. All that they require from the aspiring entrepreneurs is to fill in a simple application form with some personal details. After getting an acknowledgement of registration from the site, the investor would be required to provide a working business plan detailing the nature of the business and its expected output and sales. The business plan would need to be backed by certain documents, including the latest statistics on the growth of the business and the projected income earned through the operation of the business.

While dealing with the participation and funding of startups, it would be prudent to note that most angel investors do not look at the business prospects of the business, but concentrate only on the valuation of the business. Thus, it is important to clearly spell out the operations and future plans of the business in terms of income and profits. This would encourage the potential angel investors to participate in the venture. At the same time, the business should be able to show an annual return of at least 15% on capital.

A crucial aspect of the involvement and financing of startups is the ability of the business to attract investors. As such, it is important that the business has strong market potential and can stand alone in a competitive industry. Moreover, it is important to state that most investors prefer to deal with businesses operating in countries where they have experience in business promotion and management. The likelihood of success for a business is closely related to its location and the number of years in operation.