¿How to finance your own business?

Financing is often one of the main obstacles when starting a business. Even if you have an excellent business plan and good products, it will be useless if you do not have the appropriate financing to maintain the business.

Too much effort has long been put into teaching entrepreneurs how to raise money from outside investors and therefore putting together business plans based on ideas that may be attractive to venture capital or venture capital. Perhaps motivated by those who proclaim that there are excess capital and what is lacking are good projects.

The truth is that there are few new companies that manage to access venture capital in their infancy, in general they prefer companies established with proven business models.

New ventures, for the most part, are not attractive to venture capital because they fail to meet the demands of these investors, in other words they fail to tempt venture capital because they do not have it.

A large-scale project serving a potentially large market or with a high growth rate.

An innovative or novel product.

A well defined strategy.

But thousands of ventures do not meet these conditions, do not have access to venture capital and yet they are very successful! They grow at high rates, create jobs and contribute to the country’s economy (and that of the entrepreneur of course).

These successful companies resort to self-financing or bootstraping techniques, which are ingenious techniques to seek resources, maximizing use and minimizing costs; It is a change in mindset from thinking about how much money I need to what resources I need.

This change in thinking allows us to ask myself who has these resources and could provide them to me at low or even no cost.

When an entrepreneur is thinking of starting his own business, not only is perseverance and dedication necessary, but financing is essential.

Use your own capital. If an entrepreneur has available money, a profitable business is a good way to invest it. Either because you have savings or have liquidity from the sale of a personal asset, own financing is the most recommended option because it is not associated with the payment of interest or a return of money.

If this equity capital is not enough, it can be used as a basis and combined with other types of financing.

When a business idea is «in its infancy» it is often difficult to convince people that the product or service will work. However, your closest environment could become the great support that your business project needs. Asking for a loan from acquaintances is not a bad option, as long as you take the commitment seriously and can guarantee them the return of the borrowed money.

The financial system tends to lend especially to businesses that are already underway and already have experience in the market. However, if an entrepreneur has built a good credit history and has an attractive business idea, he can access a bank loan.

Banks have a record of the payment behavior of all the loans that a person has had throughout their life. This is called “payment history” or “credit history,” and as long as it was punctual, it will benefit you as a potential customer. Having an impeccable payment history benefits your relationship with the financial institution. Taking care of your payment history will help you in the future to apply to other financing needs; and in this way, you can continue to grow your business.

Venture capital or venture capital is a financing option for companies that are being born and that do not have a background or a track record that allows the investor to be sure that they will receive a return for the money they lend.

In that sense, investors who put their money in venture capital funds are always looking for companies that are in an early stage of development, with innovative business models, that can grow quickly and that ensure good performance when start working. When a venture fund invests in a company, it becomes a partial owner or shareholder of the company.

Bank loans and credits are the most common options when it comes to starting a business, as banks often offer specialized options for SMEs. To be granted a loan, it is necessary to demonstrate credit experience to verify that you can pay the principal plus interest. Unlike other financing methods, bank loans do not assign you advisors or investors to whom you are accountable, so it can represent an opportunity for the success of your business to depend on yourself. The entrepreneur obtains the financing he needs with the peace of mind of knowing that he will be able to return the money in comfortable installments in the first (and always difficult) stages of the project