How to finance my company without any funds?
It’s often a nightmare for entrepreneurs who set out to find enough capital to launch their business. Applying for a loan is still the most common way to find capital, but it’s one of the most complex ways to do it; banks don’t like risk and you need to have a very good profile to get a loan from a bank or a simple credit card. But there are many other ways to finance your business, here are some of them:
1. Fundraising within your own circle (Bootstrapping method):
Raising funds from family and friends may be a good way to start building your capital. You have complete control over the financing and, in general, getting a loan from friends and family is much more flexible than any other way to finance your business. However, the use of your personal funds and those of your family and friends is often limited and you need to focus on getting benefits as quickly as possible in order to take your project to the next level. In addition, it is not possible at the beginning to spend money on marketing for example.
2. Public aid / government assistance:
There are many public support programs for the creation, development and all phases of the life of the company. They can come directly from the state, regions or cities, but also from different structures, such as public institutions. This support can take various forms, repayable advances, pre-financing… Many grants are available for small businesses, providing money to help businesses start up, for small businesses to invest in research and development. But there are some drawbacks to government assistance; indeed, receiving funding is a very slow process.
3. Honor loans:
This is a personal loan at zero interest rate to finance your business. Its role is to provide leverage to facilitate your access to bank loans. If you do not have enough personal capital to obtain a bank loan to complete the financing of your business creation or takeover project, you can strengthen this capital by applying for an interest-free loan without interest or guarantees that you will undertake to repay “on honor”. These loans are often conditional on the granting of a bank loan.
4. Microcredits to finance your business:
Microcredit is a loan granted to businesses whose projects have specific characteristics that exclude them from traditional bank loans. It is a loan intended for any type of business creation or development, investment stock, cash flow, production, etc. Specialized microfinance institutions mainly provide start-up loans at lower rates and other types of loans, although some are below zero interest rates. The microcredits granted by these institutions to entrepreneurs and artisans can be up to 5,000 and must be repaid over a period of 24 months.
The loans granted :
- Start-up loans (the most common loans for entrepreneurs)
- Revolving credits
- Credits for financing on-off operations
Crowdfunding allows to collect funds from a large public in order to finance his company or an innovative project which is done via Internet. Crowdfunding is a financing solution for the creation and development of activities. This type of financing is generally complementary to other financing tools such as equity loans, bank loans, micro-credits, etc. It is a way to put people financing activities (usually individuals) in contact with each other over the Internet. Financing by individuals has many advantages because it provides easy access to capital. No need to go to the bank and hold meetings to get a credit score and find out if you are creditworthy or not.
Crowdfunding also allows you to see if there is awareness and interest in the project. The more people involved in crowdfunding, the more you will know that you have potential clients. They can act as ambassadors and the project could be used as a communication tool before the product launch and gain visibility. However, a crowdfunding campaign is often a long process and it takes several people to get the money. Knowing that less than 40% of startups get the funds at the end of the campaign, this can put your project at risk, as this process to fund so many startups is not always successful.
6. Angel investors:
A business angel is an individual who decides to invest part of his personal financial assets in innovative companies with high potential. It generally operates alone, but can join forces with other angel investors and set up a fund. Their objective is to create substantial added value through their investments. In general, they have a minority stake in the company (less than 20% of the capital) but they participate actively in the life of the company and in decision-making. For these reasons, they give priority to local companies and prefer to invest in local projects. By definition, angel investors are registered individuals with a net worth in excess of $1 million or an annual income in excess of $200,000.
Knowing this, angel investors can be a good source of capital for your business. First of all, you need to have a solid business plan and a good business case. You need to capture their attention with enthusiasm and promising data points on your company’s current situation and future potential to apply for funding.
You may be wondering how to find angel investors. It may seem difficult, but there are many resources available. For example, Funding Post organizes angel investor showcases across the country. And the Angel Capital Association is a great platform to research, meet and organize angel presentations.
7. Investment funds to finance your business:
Nearly 300 investment funds that aim to finance companies are grouped together in France within the French Association of Investors for Growth (Afic). These are professional shareholders who take an equity stake, majority or minority, in companies that are generally not listed on the stock exchange. “They participate in the definition of a clear and long-term strategy for the company, enabling it to create value for its customers, shareholders and employees,” says the association.
This private equity activity can take place in five areas: the creation of companies and the financing of new technologies (innovation capital), growing companies with strong development potential (development capital), the acquisition, transfer or disposal of businesses (capital-transfer), the buyout of companies in difficulty (turnaround capital), the financing of infrastructure, such as telecommunications or public road facilities (infrastructure funds).
Private equity players inject an average of €5 million per company, and rarely less than €250,000, over the course of a partnership that generally lasts from 3 to 7 years. In 2015, they invested nearly €11 billion in the French economy and supported more than 1,600 companies, 78% of which were SMEs, according to Afic figures.
There are many options for obtaining funds to finance your business, whether it’s for start-up or to manage your day-to-day cash flow. The resources of a small business fluctuate easily, and it is necessary to provide several solutions and financial assistance.
Everest is a business card that offers many advantages: you can benefit from plastic payment cards and virtual cards for you and your entire team. The Everest card offers a payment facility that allows you to make your purchases now and reimburse them up to 45 days after the due date. This gives you the opportunity to extend the repayment period to better manage your expenses and gain more flexibility. You can also require a credit limit (subject to approval) in order to increase your purchasing power if needed.