Financing a Startup

Financing a start-up is a major issue when creating a business . Indeed, in addition to the innovative project proposed by the start-up, financial resources are essential to launch and sustain the activity. The search for financing therefore deserves special attention. To finance astart-up , the entrepreneur must be able to present a solid project and defend it.

How do you succeed in your search for funding?

Before looking for sources of financing for the start-up, its founder must prepare a solid and well-argued case. Indeed, it is this dossier that he will have to present and defend before potential financial partners. Thus, to increase his chances of financing , the entrepreneur must:

  • Carry out a conscientious market study including the risks;
  • Develop a complete and realistic business plan ;
  • Write a detailed and coherent financial plan;
  • present guarantees;
  • Highlight the innovative nature of the start-up project;
  • Highlight their skills and professional experience in the field;
  • Be confident and determined.

Note : the funding requested for the start-up must not be excessive. On the contrary, the entrepreneur has a better chance of obtaining financial support, if the request is realistic and consistent with the return on investment objectives.

The 8 sources of financing for a start-up

The creation of a start-up without money is possible. However, the success of the project partly depends on the financing of the start-up. In reality, the financing solutions are multiple and must be exploited.

Self-financing
Firstly, the start-up can be financed by the contribution of equity from the partners or the individual entrepreneur. This personal investment can take the form of a cash contribution or a contribution in kind (material or immaterial goods). However, this source of financing depends on the financial capacities of the partners. Other external funding alternatives can then be considered.

Note : It is also possible to create a business without substantial contribution .

Funding for the start-up can also come from family and friends. This is called love money. Indeed, the entourage may wish to invest in the company because they believe in the project. In this case, the entrepreneur can repay the loan without interest and within a relatively flexible period. The flexibility of this solution makes it an interesting alternative.

Nevertheless, relatives must be clearly informed of the risks of this loan . Indeed, they must be aware that they may never see their money again if the entrepreneurial project fails. Therefore, it is strongly recommended to write in writing to avoid any dispute.

Good to know : For banks, the financial support of relatives brings credibility to the project.
The bank loan
The bank loan is a traditional method of financing . However, it is not the easiest source to obtain. Indeed, banks generally require a minimum equity contribution from the founder of the start-up before granting them a loan for the creation of a business .

In addition, the contractor must be able to present sufficient guarantees . Otherwise, the loan application may be refused. Moreover, the main disadvantage of this source of financing is that the repayment of the loan is subject to the payment of interest and must occur within a specific time.

Crowdfunding
Participatory financing, or crowdfunding , consists of the entrepreneur presenting his start-up project on an online platform. This funding method relies on persuasive communication . If the project is attractive, some investors can provide financial support in the form of a donation, a loan or a financial contribution.

Good to know : The advantage of crowdfunding is that it offers significant exposure and visibility to the business project.
business angels
Business angels are private shareholders who participate in the financing of the start-up. They are trustworthy people who believe in the potential of the project. Beyond the financial investment, these sponsors accompany and guide the entrepreneur in the creation and development of his business.

Private business incubators
Business incubators, provide financial support and support to start-ups. Indeed, they provide financial assistance for the start-up of the company and advise them in their creation and expansion, which makes them a valuable source of financing for start-ups.

Note : It is necessary to compile a file to apply for and obtain a partnership with a business incubator.
Start-up competitions
Innovative companies also have the opportunity to participate in competitions. Indeed, it is another alternative to finance a start-up since it is possible to obtain a financial contribution at the end of the competition. In addition, these events allow the entrepreneur to meet potential investors, as well as to obtain a certain visibility.

Public support for business creation
Finally, the creator of a start-up can benefit, under certain conditions, from business creation aid . Indeed, he can take advantage of the ACRE , the ARE if he is unemployed, but also tax and social assistance such as the research tax credit (CIR) or the innovation tax credit ( CII). In addition, there are a number of innovation aid programs offered by the BPI in collaboration with French Tech. Regional schemes also offer their support to young companies.

FAQs

How do you create a start-up?
The first step to creating a start-up is to find an innovative idea. Then, it is essential to study the market and draw up a business plan in order to assess the viability of the project. It is also necessary to choose the legal status adapted to the start-up project. The last step is to seek funding to launch the activity.

How to raise funds for a start-up?
Fundraising is an external financing solution for a start-up. To raise funds, the entrepreneur sells company securities to private investors. In return for their acquisition, these investors receive shares in the start-up. They will thus be able to take part in decisions concerning the company.

How to apply for crowdfunding?
To launch a crowdfunding campaign, it is first essential to choose the right crowdfunding platform. Indeed, it is necessary to favor a known platform which will bring visibility to the project. It is also necessary to prepare the promotional communication of the campaign so that it is convincing and seduces investors.

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