Entrepreneurship Financing: Navigating Between Investors, Lenders, and Banks

At some point, the majority of healthy businesses require financing. Where ongoing businesses have to finance growth and working capital, they have to manage the initial costs. Opting to obtain funds, which result in some debt, is quite ordinary.

Throughout this article, we will discuss different funding options while taking a quick look at the bigger picture.

Financing options are solely dependent on what sort of business you run. Your business’ team, market value, market opportunities, overall performance, position, age, etc., are incredibly crucial. Therefore, to acquire decent funds, you will have to customize your approach and your funding search. Don’t waste your precious time in search of a phony sort of financing.

Entrepreneurship Process

Get Familiarized with the Realities of Obtaining Funding

Let’s start with a fast reality check. A lot about business financing is heavily dependent on some specific minute-yet-powerful details. Realities go case by case, depending on the resources, growth stage, and several other components. 

Are you an ongoing business or a startup?

The outlook for funding depends mainly on certain specifics of a business. For instance, most ongoing businesses have unrestricted access to traditional business loans from a standard bank that wouldn’t be available to startups. Moreover, all the high potential tech startups have access to investment funding that wouldn’t be available to establish stable businesses that only demonstrate slow growth.

Figure Out How Much Funding is Needed

Each business has distinct requirements, and there is no financial solution that suits businesses of all kinds. Your business’ vision and personal financial situation will form the financial future of your business.

Once you figure out how much funding you’ll need, spend a little time figuring out how to get it. Some viable options are:

  • Loans
  • Investors
  • Self-funding
Amount of financing

Fund your business yourself with self-funding

To support your business, self-funding allows you to leverage your financial resources. Self-funding can come in the shape of going to friends and family for capital or utilizing your savings accounts.

Through self-funding, you will be able to keep complete control over the business; however, you also take on all the risk by yourself. So, act smart and don’t spend lavishly. 

Get venture capital from investors

Investors can provide you all the funding you need to kick-start your business in the shape of venture capital investments. These investments are usually provided in exchange for an active role or an ownership share in the business. It is different from standard financing in numerous ways. Venture capital usually:

  • Has a broader investment horizon than usual financing.
  • Takes more significant risks in exchange for high returns.
  • Concentrates on high-growth companies.

Almost all of the venture capitalists would ask for a seat on the board of directors. Therefore, be prepared to give up some part of your business ownership and control in exchange for funding.

venture capital financing

How to get venture capital funding?

Though there is no 100% guaranteed way of obtaining venture capital funding; however, it requires you to follow some fundamental steps.

Look for an Investor

Find venture capital firms — at times called “individual investors” — or angel investors. Ensure you conduct thorough background research to identify if the investor is reputable and has relevant experience working with startup businesses.

Share your business plan

You would be asked to share your business plan with the investor, who will further review it to ensure it matches the investing criteria. The majority of the investment funds focus on a geographic area or industry.

Go through due diligence review.

In case an investor is interested in funding you, he will have a detailed look at your business’ financial statements, corporate governance documents, services, and products, market, and management team.

Decide the Terms

The next step of the process is to agree on a term sheet that briefly defines the fund’s terms & conditions to invest. 

Acquire a small business loan

If you would like to retain complete control of your company, but don’t have adequate funds to kick-off the proceedings, think of getting a small business loan.

To boost your chances of attaining a loan, you must have an expense sheet, a solid business plan, and financial projections for the upcoming five years. These tools will help you get a rough estimate of how much you’ll need while also helping the bank understand that they’re making the right move by giving you a loan.

Once you are ready with all the materials mentioned above, start contacting credit unions and banks to request a loan. You will have to compare offers to get the best possible terms & conditions for your loan.

Alternatively, you can even connect with us at Lebit Finance directly. We’re specialized in financially facilitating small business owners through our paycheck protection programs which are SBA approved. 

small business loans

Locate lenders who provide SBA-guaranteed loans 

In case you are having trouble acquiring an ordinary business loan, take a look at SBA-guaranteed loans. If a bank considers your business too risky to lend money to, SBA could be your only way out. 

Small Business Administration investment programs

Small Business Investment Company (SBIC)

SBICs are privately managed and owned investment funds regulated and licensed by the SBA. They utilize their capital, plus funds borrowed under SBA guarantee, to make debt and equity investments in qualifying small businesses. 

Small Business Innovation Research (SBIR) program

The small business innovation research program invites small businesses to get involved in federal research and development that possesses commercialization potential. 

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