Finance your business

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You need startup capital to start a business. Financing your business is one of the first decisions – if not the most important – that a business owner must make. The form of financing you choose for your business could affect the way in which you structure and manage your business.

Determine how much financing you will need
Finance your business with your own capital
Get venture capital from investors
Use crowdfunding to finance your business
Get a small loan for your business

Determine how much financing you will need

All businesses have different needs, and no financing solution is one-size-fits-all. The financial situation of your business and your vision for your business will determine your business’ finances.

Once it is clear how much capital is required to start your business, you may determine the appropriate means to finance your business.

Finance your business with your own capital

This type of financing, known as bootstrapping, can be a loan from family and/or friends, or you can fund your business with money from your savings account.

You will retain complete control over your business when using this type of financing. However, you will also bear all risks involved. Keep in mind not to overspend.

Get venture capital from investors

Investors may lend your business startup capital through venture capital investments. Venture capital is usually offered in exchange for shareholding or an active role in the company.

Venture capital differs from traditional forms of financing in several important aspects.

Venture capital typically:

Focuses on rapidly growing companies
Invests capital in exchange for capital instead of debt (loan)
Involves a higher risk in exchange for a substantial return on investment
Involves long-term investment in contrast with traditional financing

Almost all venture capitalists want a board position in exchange for financing. You should therefore be open to the idea of giving up partial control over your company and its assets to get the necessary funds.

How to get venture capital

There is no guaranteed way to get venture capital. However, there are some basic steps that you can follow to make your business more attractive to venture capital providers.

Find an investor
Look for individual investors, sometimes referred to as angel investors or venture capital companies. Keep in mind to do background checks to make sure that the investor has a good reputation and experience in working with start-p businesses.

Share your business plan
The investors will review your business plan to make sure that you meet their investment criteria. Most investment funds focus on a particular industry, geographical area or business development stage.
Diligence review
The investors will review your business’ management team, market, product and service, licenses and permits and its financial health.
Agree on investment terms
If the investor is interested in investing, the next step is to agree on the term sheet that describes the terms and conditions for investing.
Investment
Once you have agreed on the terms (term sheet), you will get the requested financing. Once a venture capital firm has invested in your business, it will actively run your business. Venture capital providers usually provide funds in “rounds”. As your company meets milestones, the next part of financing will be made available to you, with price adjustments as your company implements its plans.

Use crowdfunding to finance your business

In other countries, crowdfunding is a common way to raise capital for a particular person, project or business through the collective effort of individuals. These crowd funders are not technically investors, because they will not get a share of the company, and they do not expect to get back their contribution. In Aruba, there is no crowdfunding due to restrictions imposed by the Central Bank of Aruba.

Get a small loan for your business

If you wish to retain complete control over your business but do not have enough startup capital, you can consider a small loan for your business.

To have a bigger chance to be eligible for a loan, you must have a business plan, an expense specification sheet and your business financial forecast for the next five years. These instruments will give you an estimate of how much capital is needed and will convince the financial institution of your eligibility for a loan.

Once you have the required documents, you may contact the local banks or Qredits to apply for a loan. You will need to compare the different offers to get the most beneficial terms for your loan.