Traditional methods of financing

As long as your business concept is strong and you can make a case for both profitability and sustainability in this economy, there are lots of savvy investors and banks looking for good investments.

Here are four of the most popular traditional funding methods:

1. Small business loans from Banks or other financial institutions

A small business loan is my preferred traditional funding method from banks or other financial institutions, because the bank is neither seeking crazy-large returns on its investment nor a piece of your business. Instead, the bank is concerned that you will be able to pay back the loan.

2. Venture capital

Venture capitalists are investors or firms who want to put their money and expertise into businesses and get sizable returns. They typically want both partial ownership and control in businesses with large growth potential.

For some businesses, going with a VC is a huge benefit. VC connections and knowledge can help a company to grow in ways that sole owners wouldn’t be able to foster themselves.

If you choose to go this route, be prepared for brutal feedback when presenting to venture capitalists. In my experience, they do not mince words.

Ask for introductions to venture capitalists from reputable sources. Most VCs tend to deal in specific areas of business, such as manufacturing, retail or biotech.

3. Angel investors

Angel investors are individuals or networks who want to put their money behind businesses that have the potential to make good returns. They take a portion of the business in exchange for their investment, while leaving the control with the business owner.

Angel investors are usually open to investing in local and regional businesses as well as larger ventures.

Look online for angel-investor networks in your area. Most host networking events and pitch sessions. You will have less than five minutes to capture the interest of potential investors, so make sure your pitch is tight.

4. Public Issue

If any company is going for a long term and large amount of financing then such company may go for public issue. In public issue company has to issue Equity share, Debentures, Bonds, etc and ask for funding. Generally in India SEBI (Security Exchange Board of India) is the regulatory body who give a proper way to go for public issue to arrange funding. Company has to fulfill the norms of the SEBI.