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The 5 Stages to Financing Your Start Up Business

When you’re starting your own business, one of the first things you’re probably thinking about is what a great idea you have and how it’s going to make you rich beyond your wildest dreams.

While it’s important to have goals, you need to focus on financing your venture so that it can grow and succeed. Finding financing is a crucial part of your business planning. Read on to learn about the five stages of the financing lifecycle.

Step 1: Securing Concept Financing For Your Start Up Business

Let’s say you’ve come up with an idea for a better speaker. You’ve worked tirelessly on the blueprints and designs for it – you even know what colours it will come in.

In order to attract investors, you’ll need a prototype. To create this prototype, you have to secure concept financing. Depending on your concept, you might not need very much funding.

Step 2: Finding Business Loans and Investments For Seed Funding

You’ve raised the concept funding to produce your prototype – congratulations! The next stage is finding seed funding.

Seed financing is the money businesses need to get off the ground. At this point, your costs will have increased. Even though you’ve got a prototype for your speaker, you’ll probably need to refine it further. You’ll also need to further research your market. Seed financing helps you do that.

To find seed funding, you can turn to family, friends, business associates, and other kinds of angel investors for loans and investments. The term “angel investors” refers to people who put their own money into an entrepreneurial venture. Sometimes, angels can provide more than just cash; they offer guidance about how to run your business.

Step 3: Securing Launch Financing To Go To Market

You’ve spent what seems like forever perfecting your speakers. They’re finally ready to go to market. There’s a hitch, though. You don’t have enough personnel, but you need to start forging relationships with suppliers, partners, and most importantly, customers. This is where launch funding comes in.

Launch financing provides capital so you can run your business. If you haven’t brought in investors outside of your family and friends, this is the time to do it. Outside investors are generally institutional investors from venture capitalists or other firms that invest in small businesses.

This stage of securing funding can take a while, because institutional investors carry out a great deal of due diligence. You also might find you have to give up some control of your venture in exchange for funding, but in return, you’ll benefit from mentorship and a broad network of partners and other investors.

Step 4: Obtaining Growth Financing to Prosper.

Your speakers have become best-selling products, and your staff is having trouble keeping up with orders. It’s an incredibly exciting time at your company. However, you want to continue expanding, and your current revenue stream isn’t enough.

To obtain growth financing, you might need to go through several rounds of venture capital funding. You can also turn to angel investors or venture capital to ensure your business’ continued growth.

Step 5: Acquire Exit Financing to Take Your Company Public

It’s finally happened – your speakers are one of the best products on the market. You have thousands of satisfied customers. There are still expansion opportunities you want to take advantage of, though. To do so, you need more financing.

The final stage of the funding process is known as “exit financing.” That means that you raise money in order to pay back your investors. You might consider an initial public offering (IPO). During an IPO, you sell shares of your company to raise more money and provide a return on investment to your backers.

Financing is the lifeblood of a business. Securing the funding you need means you can grow and succeed into the future.

About the Author: Lendified

Lendified is Canada's premier online lender for small businesses. The company was founded by former bank executives dedicated to provide businesses with fast, easy, and affordable financing. The Lendified team regularly produces blogs and guides to help small business owners succeed.