This article was contributed by the team at Ideas.Inc, an annual business competition organised by the Nanyang Technopreneurship Center.
The Einstein that you are has drafted the perfect business plan loaded with forecasts and good vibes. You have a good feeling that this is gonna work because you have spent more than what it is usually required in carefully conceptualizing and researching on your business idea. Yet, there’s one thing left in order to kick the inertia. No prize for guessing the F-word. That’s right – FUNDING.
Funding has always been the business element that everyone is trying to avoid maybe because it sounds complicated, difficult to handle or worse, a problem to solve for the lack of it. But every business needs funding and whether you like it or not, you will have to do a lot of legwork to get this part done.
When there’s scarcity for financial resources, do not let the roadblock sit in front of you and kill that business plan you’ve sweat on. Try to work at it by collating information on potential sources of funding for your business. Being young and new has its good points and its otherwise negative aspects. Your idea might be brilliant but unfortunately in business, you have to prove to your investors that your business is workable and that their investment will return and grow with minimum exposure on the investors’ part. Pitching for a funding approval is like a game field. The goal is to enthusiastically build trust and confidence and eliminate all possible signs of doubt about the business.
For young entrepreneurs, here’s a rundown of funding options that may be used to fuel your business.
Bootstrap Financing
This is, by far, the safest option for starting entrepreneurs.
Bootstrap financing means frugally using your current earnings and assets to fund your business. Less money borrowed means less debt and higher credibility. However, your own savings might not be enough to support your operational costs. (Related article: Bootstrap Finance: The Art of Start-ups)
The 3 Fs
This type of funding option comes in various names such as ‘crowd funding’. Some people call it the 3 F’s (friends, fools and family). Count yourself lucky if any of these 3 Fs could lend you an amount enough to start your business. The downside is, it’s purely based on goodwill and they can take the money back whenever they want to – even when you’re least prepared. This could also affect your relationship with them as you will be forced to pay back favours in the future.
Financial Houses and Bank Loans
Strictly business, borrowing money from financial houses and banks could be very exigent. It demands a good credit history and most often than not, collaterals that the banks can take hold of in the event that you cannot pay back. The chance of getting grants from financial houses and banks for a young entrepreneur is very slim. Should you get approved, believe it or not, you will be more pressured to earn back the money borrowed plus the interest, making you worry more about paying the debt than making the business prosper.
Venture Capitalists & Private Investors
Venture capitalists are business bodies funding startup businesses for interest and ownership. VCs may not ask for collaterals but the process of applying takes a lot of courage and effort. You will have to pitch and convince them that the project does work. According to Mark Sutter of entrepreneur.com, there are four things that VC’s look for in a startup business – management, market, money and above all else, momentum. Sometimes, even if you have all four, if you do not have the power to convince, your application wouldn’t be granted.
Private investors on the other hand are the direct opposite of VCs. They are often called business angels – very wealthy individuals who look more into your capabilities as a person rather than the promise of your business. If your idea is not of their interest, you will have to gain their trust which takes a lot of time.
Business Grants from Government
There are various grants that are being offered by the government but also keep in mind that there are a lot of aspiring young entrepreneurs who are keen to take the plunge into the entrepreneurial world. They are as eager as you are and it will take some time to place your paper on top of the file.
About The Contributor: Ideas.inc Business Challenge
Ideas.inc Business Challenge is one of the funding sources you can find in Singapore. Already in its second year, Ideas.inc aims to provide financial and institutional support to budding entrepreneurs with golden business ideas. Each year, young entrepreneurs are invited to join the competition where 15 teams get up to $15,000 each for prototyping and feasibility study and 6 of them will be chosen to receive up to $50,000 for commercialization. Powered by NTU, ideas.inc Business Challenge provides an experiential learning platform for entrepreneurs, allowing them to win zero-interest funding, professional mentoring from experienced entrepreneurs in the field, and massive exposure. It is part of NTU’s project in turning Singapore youth into proactive entrepreneurs.
In addition, with Ideas.inc Business Challenge, you do not only get the financial support but the pertinent guidance through mentorship that you need in making your business succeed. Here, your idea doesn’t end in making it tangible but aiming to keep it progressive.
Take part in Ideas.Inc., an annual business competition organised by the Nanyang Technopreneurship Center for aspiring entrepreneurs aged 26 years of age and below. Ideas.Inc. provides significant funding, mentorship and skills enhancement workshops for its successful participants. Ideas.Inc can also be found on Facebook.
Image credit: aresauburn™
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