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How to finance a project?

 Do you have a project in mind, but don't know how to finance it? You are not alone! Every day we receive dozens and dozens of questions about the best way to fund his project.

In this article, we'll explore the most popular (and best) ways to raise money to fund your project.



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How to find money to finance a project?

Here are some popular funding sources:

1. Your savings

Financing your project with your savings is probably the easiest way to finance anything. Indeed, in the ideal world, you should have enough money saved to finance your project on your own. It might not be the method you're looking for, but it's definitely the safest and least risky on this list.

However, as you can understand, the biggest limitation of this method is that, sometimes, if you have a large project in mind, you will not be able to finance it with your savings alone. For example, if you make $25,000 a year and your project costs close to $60,000, this method is probably not for you since you will have a very hard time saving that money.

However, be careful. Letting all your savings flow into a project that may not be able to bring you the expected return on investment can be risky. Never invest money that you are not prepared to lose.

2. Venture capital

Venture capital is often a term associated with small tech startups in Silicon Valley, but that's not always the case.

Venture capital firms invest in small businesses which, according to the firm's analyses, will be promising and profitable in the future. When you do business with a venture capital firm, be prepared to sell some of the shares of your company to finance it.

The advantage of venture capital is that you don't even need to have a product/service/platform already created to raise funds, you can simply show up with an idea and a robust business plan to receive funding.

Since you are selling a certain part of your business, be careful not to involve firms that do not have the same end goal as you. Especially if you are selling more than 50% of your business.

3. Your family and friends

Do you know that a very large part of small businesses start with small loans or investments from friends and family members of the entrepreneur? And yes, even several technological giants such as Facebook or Microsoft started with a loan / financial assistance from the creators' relatives!

You can even offer to sell them part of the business to motivate them to stay involved in the project.

The main problem with this method is that if your business does not work as expected, you will not only affect your relationship with your friends and family members who have invested, but also, potentially, affect their financial health. It is very important to keep this in consideration before asking for funding from your friends and family members.

Also, if you sell part of your business to friends or family members, you will (whether you like it or not) gain a new business partner. Which isn't always a good thing. Especially if your new business partner will disturb you in the creation of your project or if he does not have the same vision of the business world as you.

 4. Bank loan

The bank loan is probably the first method you thought of to finance your project. And it's not for nothing. Generally, banks can offer all kinds of loans to finance all kinds of projects.

However, one thing to keep in mind is that, most of the time, banks are looking for borrowers with a good credit history and a good credit score. Moreover, for banks, a “good project idea” is not enough. You will have to provide a complex business plan and often even prove that you are capable of carrying out the project.

Finally, to get the bank loan, you will most likely need to provide some collateral for the bank.

5. Merchant cash advances

A merchant cash advance is another type of financing you can explore for your project. This solution is usually very easy to obtain and, in addition, you get the money very quickly. However, be careful! Expect a high interest rate on the loan.

Finding a good source of merchant cash advance is very difficult. With our free comparison tool, you can enter all your details and, in minutes, see the best merchant cash advance offers available for your financial situation and for your project. Our tool allows you to find financing of up to $500,000.

If you are unsure if this option is best for you, we strongly advise you to consult with your CPA and/or financial advisor.

 

6. Credit card

Credit cards are an easy and instant source of business financing. You can use them to pay for almost any start-up expense for your project.

On the other hand, as you probably already know, credit cards are not very advantageous if you are not able to repay the balance on time. Not only are the interest rates very high, but they are also directly linked to your credit rating. So if you miss payments, your personal financial situation will be affected and your credit rating will drop.

In our opinion, credit cards should be the last source of financing to explore for your project.

7. Line of credit and business loan

The line of credit and the business loan are two types of loans that are very advantageous for the borrower when the latter has a good credit history and a good credit rating. Indeed, these two types of loans do not have very high interest rates and allow you to finance your expenses perpetually as long as you repay your balance.

On the other hand, obtaining a business loan or a line of credit to finance your project from a bank is very difficult. You must, for most banks, already generate some income to be able to qualify for this type of loan (not to mention that you must have a good credit score and history).

If you do not have a very good credit rating or your business does not generate income, you can always explore the possibility of borrowing from an alternative financial institution.

 

 I have a project but no funding

Do you know that you don't always need to have financing to start your project? Even that, in most situations we often overestimate the amount we need to start our project.

And while it's true that you're probably going to need financing at some point in your journey, there are likely alternatives for you. If you're just getting started, why not start small?

You don't really need to start your business with $30,000 inventory. Often you will only need a few hundred dollars (even less) to start a business.

 Conclusion

If you do not want to opt for the free route or need a large amount for your project, we advise you to take a look at our loan and financing comparator for businesses. It's free, very easy to use and you will get a quick response.

 

 

 

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