You did all the preliminary analysis and you’re finally ready to start your Box but there is only a little issue: finding the money to fund the start-up. No problem, here are some possible options:
Based on the origin of the funds obtained, it is possible to distinguish between external financing and internal financing, depending on whether the capital of the company is composed of funds made available by third parties through the credit or capital market, or whether the funds originate from the performance achieved by the company. While the internal funding is generally easier for an already estabilished company, that can for example make a retention on the revenues or through depreciation, in the specific case the financing is almost always external.
External funds (or third-party funds) of a company include capital made available by third parties in the form of fixed-period loans, while equity refers to the resources provided by the owners of a business or the profits made that remain in the business.
the first form of financing is of course with a loan which means that you go to a bank, talk them of your projects and they, after having obtained some guarantee, give you the money you need. Later you’ll pay back this monies in several instalments with relevant interests depending on your risk profile and other parameters used by the bank.
Same as before but the money come from relatives and parents. In this case no guarantees are required even if it is a good idea to set up a return plan and consider some interests as if the sum was invested somewhere else it would probably generate a revenue. Also self-loan, that usually come from saving, should consider e return plan.
This is a good alternative if you own some assets but you don’t want take them out of the present investment because, for example, they are locked for some years. The bank opens you a current account with the possibility to gon in the red figures up to a specified amount. In this case you pay only the interests of the sum you use and youìre not obliged to pay back fixed instalments and you neither have a return plan. This kind of operation is usually guaranteed by deposits or monies invested somewhere else or by a third person.
An operating lease is a contract that allows for the use of an asset but does not convey ownership rights of the asset. Usually the guarantee for this type of financing is the asset itself and normally no additional guarantees are required fi the financed sum doesn’t exceed a given threshold.
Someone gives you the money for a portion of the company, This doesn’t work with associations or no profit entities but being pure capital works with LTD or similar companies. There is no return or interests in this case as the money will be recovered once the investor will decide to quit the company and sale his part with, hopefully, a major value.
PRE SALES – CROWDFUNDING
Another way to get money is to pre sale subscriptions to people you know and that told you they will come to your Box until opened. You can make some special offer to reward their trust and raise some additional funds to run your business.
About guarantees, the most structured is the business plan and the more you show that you know your business and how to run it and the less difficult will be to get the money, especially from private investors, considering that the amounts we’re talking about are relatively little and that we’re talking of micro enterprises.