PR for People Monthly November 2013 The Entrepreneurial Mindset | Page 7

Capital is the lifeblood of any business
venture, and for startups, securing enough capital
to become operational and profitable is a daunting
challenge. Here is a look at the pros and cons of five
startup finance strategies.
1. Friends and family: Asking friends or family to
invest in a new business is a very informal financing
strategy. This is among the simplest ways to finance
a startup business. The pros – can offer quick turnaround and usually doesn’t require an extensive business plan. The cons – borrowing money from friends
and loved ones can destroy relationships.
2. Crowdfunding: This is the newest startup finance
option. Here, small amounts of money are raised
from a large group of people via crowdfunding
websites. The pros – can offer quick turnaround and
a great deal of flexibility. The cons – not all business
ideas are right for crowdfunding; requires creativity,
tenacity and extensive self-promotion.
3. Equity investors (angel investors or venture
capital): Equity investors are the holy grail of
startup finance—particularly among technology
startups. Entire business models are developed
around the end goal of securing substantial equity
investment. The pros – can offer significant amounts
of capital. The cons – owners have to give up equity
and the investor may want to be very involved in the
day-to-day operation of the business; due to the high
risk of financing new ventures, equity investors are
very selective about which projects they will finance
with less than one percent of pitched projects getting
funded;
4. Banks:Bank financing used to be an attractive
option for funding a startup. But in the wake of the
2008 global economic meltdown, bank financing for

startups is available to only the most creditworthy.
The pros – if it is available to you, business loans
and lines of credit can offer reasonable, consistent
interest rates and flexible payment plans. The cons
– unattainable if you have poor credit and banks
require fully developed business plans and financial
models.
5. Government grants: Contrary to popular belief,
there are not billions of dollars in free government
grants to enable someone to start a new business.
The federal government does not give out grants to
start a business—even if you are a woman, veteran
or member of a minority group. Government grants
are only awarded to businesses conducting activities
that support particular priorities. If your business
or project is aligned to one of those priorities then
government grants can be an attractive option. The
pros – government grants do not require the owner to
give up equity or control and the funds do not have
to be paid back. The cons – the business grants landscape is highly competitive with only the best of the
best getting funded; grants come with lots of strings
attached.

Finding the best way to finance a startup
requires research, analysis and thoughtful reflection
about long-terms business goals. Regardless of how
you decide to finance your startup, it is critical that
you understand the short- and long-term implications
of your choice.

Ronald Flavin is an internationally acclaimed
Business Organizational Strategist who has specific
expertise in developing and writing grant proposals
for businesses of all sizes as well as for non-profit
organizations, government agencies and educational
institutions. Companies www.rflavin.com