If, after a market study, the business plan reveals a financing need greater than the capital available, there are several alternatives to finance a business creation project. In a nutshell, self-employed entrepreneurs have 4 categories of actors aiming to obtain financing for their business creation project. These are equity investors, banks and credit institutions, crowdfunding platforms and public bodies.
Ways to finance your business start-up
To start a business, it is essential to have a personal contribution. Personal money and love money (funds that the entrepreneur can claim from family and friends) are used to self-finance certain needs not covered by banks. These funds reassure financial institutions when they need to take out loans. Entrepreneurs can also participate in creative competitions such as the national competition to support the creation of innovative companies, the Social Entrepreneur of the Year award….
If the aid is distributed by the State or local authorities, the subsidies are received several months after the start of the activity. The loans of honour allow to complete the personal contribution. This last credit is granted by non-banking organizations to selected creators.
Financing a professional project: a step feared by entrepreneurs
The majority of projects require external funding in addition to personal contributions and love money. Obtaining financing to start the business is often compared to a real struggle where the company founder has to make a series of appointments, send registered letters and present to investors.
For all these reasons, some project leaders are unable to make their dreams come true. They consider that the financing of the creative project represents such an insurmountable step that it does not succeed in convincing and obtaining the necessary financing for their project. The types of fundraising and the various existing financing solutions have certain strengths and weaknesses.
Crowdfunding, banks and credit institutions
The crowdfunding platform allows you to collect donations, investments or loans from a large group of people. The principle of participatory financing is based on the fact that it is easier to collect €1 from 1000 people in order to contribute to the financing of a project than to convince a person who can contribute €1000 alone. Banks and specialised credit institutions can be used to finance part of the future company’s assets. Eligibility for a loan is based on 3 things: the demonstration of a credible project, the presentation of assets to be financed and the presence of equity contributions.