AS FOUNDER CAN SECURE SEED CAPITAL AND ONGOING LIQUIDITY
No matter how good the business idea of a founder is - without a capital can be no own business on its feet. But with the availability of seed capital alone, it is far from done. Accordingly, the liquidity from day one of operations must be ensured on an ongoing basis to keep the business operations going. A lack of financial planning is still one of the most common reasons for a failed establishment.
Meanwhile, there are start-up companies a colorful bouquet of different financing options. However, not all suitable for every concept and thus the benefits and risks of each financing should be considered.We provide five alternatives for startup financing these steps:
1. DEBT FINANCING THROUGH BANK CREDIT
The common form of debt financing is a loan. The entrepreneur borrows money from a bank and it must repay within a specified prior period plus interest. Fact, a survey by the Federal Association of German startups eV but that comes for only one in five German start-up bank financing as a possible source of funds in the foundation in question. The financial instrument is a distant second to seventh possible sources of funding for start-ups, the "3. DSM German StartupMonitor " the Bundesverband eV German startups
Possible reasons are that the collateral of a startup lending often insufficient. In addition, a very complicated process for lending, must meet numerous requirements for the young company comes. From preparing the business plan to the negotiations with various banks and a half years may pass before.
Possible reasons are that the collateral of a startup lending often insufficient. In addition, a very complicated process for lending, must meet numerous requirements for the young company comes. From preparing the business plan to the negotiations with various banks and a half years may pass before.
Advantages:
- Predictable security and stability
- Reliant ratio
Disadvantage:
- Dependence of interest rate fluctuations
- High administrative costs
- Lengthy process
- Collateral must be present
2. STATE FUNDING
With over 2,000 programs throughout Germany and Europe, the state funding landscape is very diverse. Often founders expect interest loans and even micro-credit, with interest-only start-up years are possible.However, the path through the jungle of support is very cumbersome and difficult to see through because of the complicated and complex procurement directives. For very young startups this is also connected with a large time factor, the founder in the development phase in which everything goes very quickly and dynamically equip can afford, barely. The government incentives have lost as a financing instrument under founders something to value and demonstrate the DSM only fourth place.
Advantages:
- Soft loans
- Interest-only start-up year
Disadvantage:
- Complicated procurement directives
- High time traffic when applying
3. FACTORING
Often entrepreneurs and young companies do not have sufficient (start) capital to maintain its liquidity at longer payment terms of up to 90 days of their clients. In addition to fast cash within 24 hours, flexibility and security just startups also benefit from the professional acquisition of the reminder and collection system at the full-service factoring . When factoring the conditions to be met by small businesses and start-ups, lower than for the flow of bank loans are. In this case,factoring also be used as a form of financing an adjunct to other financial instruments and as sustainably provide liquidity and relief of start-ups.
Advantages:
- immediate liquidity
- Complete failure protection for unpaid claims
- Arrears management and receivables management to be outsourced
- Faster and more transparent process
Disadvantage:
- Not suitable for all industries
- Interest shall be payable for the liquidity provided is similar to much like a bank loan
4. CROWDFUNDING/-INVESTING
When crowdfunding gather entrepreneurs capital one with potential customers and investors. This is usually done through a platform that brings together investors and startup. For start-ups, which are still very much at the beginning of its establishment phase, crowdfunding may optionally be too early, as the courting of the financing by the mass can be very intense time and financial resources. Also missing from this financing alternative, the know-how of experts that the "crowd" often can not provide.
Therefore, the financial instrument is relatively distant second place 9 of financing for start-ups.
Advantages:
- Interest-free financing
- First awareness of the market from the beginning
Disadvantage:
- difficult to plan
- Resources are heavily involved
- Incalculable results
5. EXTERNAL INVESTORS / VENTURE CAPITAL
When venture capital investors equip founder depending on the development stage of their product or their service with the appropriate capital. For this, investors often acquire company shares.So the financial flexibility increases, but do not wear founder responsible only for themselves but also for the investors who now want to be kept up to date. When venture capital is an investment and not a contractual obligation. This means that an investor of a company makes money available and in turn the company and is involved in its profit - but just stands for losses. This form of financing works best for start-ups who want to bring a promising product to the market, which has very good prospects for success and growth.
Advantages:
- Stability and security
- Advice of Investor
- Investment instead obligation
Disadvantage:
- "Voice" of the investor
- Profits of the investor