6 Most Preferred Start-up Financing Options for Business Women

According to a 2019 report published by SVB, the percentage of start-ups with at least one woman on the board of directors is now nearly 50 percent. And for the second year in a row, nearly 60 percent of start-ups have at least one woman in an executive position. 

More and more women are entering into the entrepreneurial world every day. Every start-up needs financing. This blog is dedicated to exploring the various financing options such as business start-up loans, crowd funding and many more.

  • Friends and Family

Family is always there for us in all our needs. Our best friends love to see us grow and succeed in life. Thus when you ask for some money to start your own business, they are mostly bent towards helping you.

The issue is that they might not have the amount you need. Building a start-up is not cheap. And you require finances till the money starts coming in. That may take some months or a year, at least. Will they be able to provide you the amount till an uncertain time?  

Also, in this case, the cost of failure would not just be financial, but personal too.

Borrowing from our closed ones is an easy option, but a sensitive one. You cannot build your start up on uncertain finances.

  • Credit Cards

Credit cards mean borrow today, pay later with a huge interest. You can get the money for the month easily to set up your office, but what about the month to come. You would be asked to pay the whole amount, failing which interest will keep accumulating each month.

This creates a vicious cycle of taking a debt to pay for an earlier debt. You cannot afford being under long debts in the beginning of your business. This can hinder your growth prospects in the market. You should borrow only what you can repay easily.

  • Bank Loans

Traditional sources like banks have special business loans for start-ups. They are secured and reliable loans, which you can avail for decent amounts at lower rate of interests.

The application involves documents like personal and business bank account statements, details of all your owned, rented or leased properties, proof of all sources of income, business plans and preferred loan structure. The banks generally demand a security against the loan in the form of a mortgage or a guarantor.

The approval of your application depends upon your experience in the business field, the scope of your start-up business, profit estimation, business plans and the risk involved in the investment.

The process can be a little tedious and time consuming, and any downfall in your start-up may lead to the bank repossessing your mortgage.

  • Business Start-up Loans

The online direct lending market offers specially devised business start-up loans.  These are unsecured personal loans, and do not demand any security.

The application process is free of any hassle, and can be done online or even through your mobile phone. The approval is usually granted within a day or two.

Your business plans and future prospects determine the risk of your loan. That risk is incorporated in the interest rate offered on your loan amount. Your good credit score and financial condition escalates the application process.

These start-up loans come in easy and are very convenient. The high rate of interest might make them a little expensive.

  • Crowd Funding

A latest trend shows start-up persons raising money through crowd funding. The crowd funding websites enable you to pitch your product or idea online and interested customers can invest in your start-up right there. You get customers even before launching your business, and money comes in without any interest or tedious procedures.

“Women across the globe are 32% more likely to reach their financing goals using crowd-funding than men.”

This works as an online campaign, where in exchange for money, you promise the investors your start-up product at discounted price, or you reward them in the form of gifts. These investors can also be offered equity partnership for their role in setting up your business. But that decision lies with you.

This option can only be used in short-term. You cannot rely on crowd funding for long-term finances. There are multiple people to pay back in this case, instead of just one.

  • Pledging your Future Earnings

You now have the option to pledge your future earnings to an investor. Some online marketplaces let you pledge a percentage of your future earnings in exchange for upfront and undesignated funding.

After a careful valuation of your start-up product in the market, you can analyse the value of profits in the future, and raise money relatively.

These have come to be known as personal investment contracts. The legality may have to still be established though.

Lastly,

The market for start-up financing is vast. You will have multiple options when you start looking. But it is you, who will have to take the first step.

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