In the last article, we have discussed business financing methods suitable for established businesses, including Working Capital Financing, Unsecured Loan, Secured Loan, Invoice Financing and Bridging Loan. Let’s look into financing methods suitable for start ups!
Crowdfunding is the use of small amounts of capital from the ‘donation or investment’ of a large number of individuals. For startup business owners, this is the best way to finance their business venture. In earlier days, business owners could only rely on bank loans, angel investors, risk investors or loans from family and friends.
The capitals of crowdfunding are from investors’ personal income. The investors are investing in your business, similar to investing in a potential stock. Crowdfunding allows entrepreneurs and charity associations to finance their business by expanding the pool of investors beyond the traditional circle.
Thanks to the support from Malaysia’s government. We were the first country from the ASEAN region to create regulations for crowdfunding. Crowdfunding in Malaysia is regulated by Securities Commission Malaysia (SC Malaysia) and the Bank Negara Malaysia (Malaysia’s central bank). This causes the mushrooming of crowdfunding platform in Malaysia such as Crowdo and Crowdplus.
Beside that, Malaysia has 10 regulated and well-known ECF platforms including Ata Plus, Crowdo, FundedByMe, Fundnel，PitchIN, LEET Capital, Ethis, MyStartr.
Angel investors also known as a private investor, seed investor or angel funders who are high-net-worth individuals. They provide financial backing for small startups or entrepreneurs in exchange for ownership equity in the company.
Angel investors have their connections and still expanding their networks to research how to gather their funds to increase the ROI. If your business is able to give their desired returns, the angel investors will share their plans and financial returns as a token of return.
In this digital era, angel investors are mostly anonymous. By leveraging the right platforms, business owners may arrange a meeting to present their business ideas and plans to attract angel investors. Below are a few websites to connect with angel investors:
- NEXEA Angel Investment Network
- Cradle Fund
Government Fund & Grant
Government fund and grant are one of the best ways to finance a business. As Malaysia’s government is very supportive of startup business and business innovation, there are regulations such as omitting the guarantor or collateral, profit margin, and handling fees. Although the process of applying government fund and grant takes a longer period, the benefits that provided by the government are still worth applying. Business owners may check out the government organisations below:
- MDEC Development Fund
- Business Accelerator Programme 2.0 (BAP 2.0)
- Pernas Medium Enterprise Development Franchise Scheme
- Investment Programme 300 (CIP300)
Venture Capital & Risk Management
Venture Capital or Risk Investment is a form of private equity and a type of financing that investors provide to potential businesses. The investors can either directly invest in the way to obtain equity in investment companies or provide funds to investee company.
Venture capital companies are mainly to help the invested companies to obtain greater profits, not investment companies. They only provide funds and professional knowledge and advices. The funds are mostly used to invest in new ventures or unlisted companies in pursuit of long-term profits. As VC companies are third-party owners, the partnership must be a win-win situation.
VC companies explain the steps from beginning to end to help your partners understand the financing activities and evaluate the growth of your business if you want to get the right venture capital. Business owners have to understand that investors only interested in profit growth! In addition, venture capitalists own a majority of stock, holding shares include:
- RHL Ventures
- TBV Capital
- 500 Start-ups
- Vertex Ventures
- Spiral Ventures
If the business is not performing well and credibility still not improved, then the mortgage contract will have some issues. Working capital loans are not suitable for business that lacks the cash flow to meet regular payments. It is because the working capital ratio indicates – how well a business can meet its current debt and how much working capital financing will be required in the future.
In current global situation, government grants and crowdfunding are the ways that can finance a business. While unsecured loans, working capital financing, and invoice financing are the options to manage the current Covid19 situation.
As the average age of business owners younger, traditional financing methods may become less viable. Young owners are less likely to own a property, so it makes the banks reluctant to borrow the loan. The best financial loan that suits your business depends on your business nature as well.
If you need professional advices for your business’s financial status, you may seek for professional firms such as Vanta Capital – a one-stop business financing solution firm, who has comprehensive business finance knowledge and experience. They provide one-to-one professional financial consultation, various financial aid, and responding to the financial needs of enterprises at different stages of operation.
The first step is to engage a business financial advisor who provides professional reviews and analysis for the business. Recommendations based on analysis of financial status is always the most effective way.
Vanta Capital has over years of experience in commercial loan and they are capable in helping companies avoid leaving bad records in bank. Hence, they ensure that your company’s future applications and strategies can be successful to grow your business.