Question

List and explain 5 types of funding you might use to start, operate, or expand your business.

Answer 1

In order to start, expand or operate a business, we can use the following types of funding:

1. Bootstrapping

Is one of the main capital investment we can use in order to facilitate our entrepreneur endeavor. Bootstrapping involves the concept of self-funding, where we use our own money as the capital to start our business since it is difficult for an entrepreneurial startup to get the required funding without being able to show the results.

2. Crowdfunding

If we have a design for a product ready, we can seek crowdfunding in order to be able to use the money to build the required projects, necessary functioning or help the currently involved structure by the means of expansion. It depends on the aspect of how favorable the service of the product would be once it has been completed.

3. Angel investors

We can use angel investors which have surplus cash available to invest in good and opportunistic businesses, in the easiest sense, if our business shows the promise, an angel investor can help us with the necessary funding which we can then use to develop the structure and functions necessary to achieve the required baseline values for the output to be achieved.

4. Venture capital

Venture capital can be considered to be funds that investment companies offer which are well managed and useful for companies which show a huge growth potential for the investors to consider. The funds are provided against the equity in the company.

5. Business incubators

A business incubator, in the easiest sense, can be considered as an individual or a company that helps us start our entrepreneurship, provide guidance, direction and the required network in exchange for equity in the company for its eventual growth capacity.