Contrary to an old belief, banks do not invest in a startup. Of course, most banks offer business loans, but they only lend to businesses which are already thriving. If your business is a startup, you need to find another way to get your business funded.
And while you have a business plan neatly printed out, you have to make sure that you can present your company well. Most investors do not fund a business just because of a business plan. You may have a vision and the steps to get there, but the investors will surely look into your team, your products, and company as a whole. Simply, they don’t invest in a business idea, they invest in a company that is worth their money and can generate returns with interest.
So now, where do you look for your funds?
Another popular belief is that a lot of startups get funded with venture capital. Venture capitalism is still a business where people are tasked to invest other people’s money. This means they are risk-averse. They can’t afford to take unnecessary risk, which is why it is also rare for a venture capitalist to invest on a startup unless it has a rare combination of market opportunity, product opportunity, and proven management.
Angels and others
Venture capital is not the only way to get funded. It is still too early to lose hope especially that there are smaller investors in what is called “private placement.” For example, there are wealthy individuals who are looking for a new venture. You may consider them as “angel investors.” There are times when potential investors meet up regularly and review proposals. These groups of investors are often called “dentists” or “doctors”. Many entrepreneurs also turn to their friends and family for funding.
Since banks are too risk-averse, they will only lend to businesses which have already thrived. On the other hand, there are private lenders who offer business loans without any required collateral nor co-borrower.
Depending on your loanable amount and repayment term, you will be charged with an interest rate. If you want to keep your business to yourself and you get a hard time from investors who want part of your business ownership, then you can just apply for a business loan from a reputable money lender.