Types of funding sources

• Discover the most common types of financing sources for SMEs and entrepreneurs

If you are looking for a capital injection for your project or business, in this article you will find various financing options for companies. Discover the most common types of financing sources for SMEs and entrepreneurs.

Bank loans

They are traditional financial products offered by banks or credit unions. Access to these loans is determined by the requirements and conditions set by the credit institution.

Alternative financing

Broadly speaking, they are all the options for obtaining financing that are outside the banking environment. Therefore, they are not subject to the regulations or standards that are met in the banking system.

Seed capital

It is the initial financial support to begin the company's operations and its consolidation. This type of source of financing is usually oriented towards new companies, generally of innovative products or services, that incorporate new technology or that break into new market niches.

Basically, an investor provides the capital injection in exchange for convertible debt or shares of the company.

the 3 F's

In the world of entrepreneurship, the 3 Fs are friends, family and fools (friends, family and acquaintances). They are the accessible resources that entrepreneurs have closest at hand and those they usually resort to at the beginning of their business journey.

The operation is simple: the entrepreneur has his own savings to start his project and his family, friends and other acquaintances give him financial support to promote it.

crowdfunding

The crowdfunding It is a source of collective or solidarity business financing, increasingly known and used. This mechanism is supported by technological platforms to offer capitalization tools without intermediaries, with a flexible and efficient collection operation. In this way, the available capital is put in contact with a project, company or charitable cause.

Lines of administrations or public entities

There are programs or lines of financing charged to public budgets, especially in times of crisis, with the aim of facilitating access to financing for newly created companies or strategic sectors that need special development.

The financial conditions are interesting for the company but, as an inconvenience, it must be clear that obtaining these funds takes time and various stages of administrative procedures and documentary justifications.

venture capital

venture capital or venture capital is a type of investment that occurs through shares to finance small or medium-sized companies; For example, startup. It is essential that companies have a basic level of development and entails the transfer of a minimum of 25% of control of the company.

Business Angels

The angel investors (business angel) are the people who invest their money in the beginnings of emerging companies or startup, in exchange for shares in the project's share capital. These angel investors are sometimes also mentors who advise and tutor.