Best Ways for Getting Funding to Start a Small Business

Best Ways for Getting Funding to Start a Small Business

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How Small Businesses Get Funding

They say that cash is king. That is doubly true when it comes to launching a new business. Cash is needed both during the start-up phase and to keeping the business running.

Read on to learn the different options of funding your business.

Owners Investments

In 2011 6.6 million new businesses were opened. On average business owners put 80,000 dollars into their start-up venture. It has been found that about 30 % of small businesses are likely to borrow money from friends and family.

The majority of funds for a young firm come from credit cards, bank loans and other lines of credit. On one in every ten businesses don’t make use of capital injections.

Venture Capital

Venture capitalists have been responsible for the growth of many a business. In fact, for every dollar of venture capital invested from 1970 until 2010, 6.27 dollars of revenue was generated in 2010.

The cash injections by venture capital investments, has led to new jobs being created in many industries. Some industries that have benefited from venture capitalists include:

• Software
• Biotechnology
• Semiconductors & electronics
• Computers
• Telecom

Angel Investors

Angel investors have had a hand in the success of many businesses. Some big name companies that got to where they are thanks to angels include the likes of Apple, Google, Twitter, Ford and Bell.

Here is a breakdown of angel investments made in different industries in the first and second quarters of 2011:

• Healthcare – 25 %
• Industrial & Energy – 17 %
• Biotechnology – 14 %
• Software – 11 %
• Media – 8 %
• Retail – 8 %

Crowdfunding

Crowdfunding has been gaining a lot of popularity when it comes to funding options. Many business start-ups have used the power of crowdfunding both as a means to raise cash and for some much needed publicity to catapult their businesses forward.

It has been projected that $2.8 billion will be raised in total through crowdfunding platforms in 2012. That is an incredible 91% increase from the previous year.

Kickstarter is one of the most well known crowdfunding channels and so far over $275 million has been raised on this one platform alone. The types of businesses and ventures funded have been varied, which shows that there is room for all types of projects to gain the funding they need through crowdfunding. Here is a breakdown of which categories the Kickstarter raised money has gone to:

Film and Video – $69 M
Music – $45 M
Games – $42 M
Design – $41.9 M
Technology – $15.2 M
Publishing – $12.9 M
Art – $12.6 M
Theater – $9.3 M
Food – $8.7 M
Comics – $7.9 M
Photography – $4.3 M
Fashion – $3.9 M
Dance – $2.4 M

New laws are being passed to deal with the legal aspects and challenges that crowdfunding presents. These new laws will further cement the usefulness of crowdfunding as the go to option for many future start-ups.