Small businesses or start-ups play an extremely important part in the economy of every country. They play a major role in the GDP of the country as they cater to unemployment. Startups are mostly welcomed by governments and there are many government grants for small businesses in more than most countries.
The Significance Of Small Businesses
By small businesses, we usually refer to the businesses that constitute of less than or equal to 500 workers. Representing about 99.7 percent of all firms in Canada, small businesses have evolved quite a lot. They have been successful in generating 64% of the new jobs for the last 20 years.
Role In Economic Growth
Small businesses have largely contributed in empowering the local economies. The economic growth is stimulated through the small businesses, as they provide opportunities to the ones who could not be picked up by business giants. It has been largely visible in recent years that small businesses have attracted the ones who opt for something new which would help to improve the use of existing products or services.
Adaptability in business refers to the nature of the business to survive through the various economic phases that it goes through. Small businesses have a good adaptability factor due to numerous reasons. One of them is the trust which is the base of a small business. It is quite often seen that customers tend to support the small business owners even in tough times. This is the main reason why a small business is able to stand through tough phases and maintains economic stability at the local level.
Scope For Future Growth
There is a great scope in small business if you have the right input. There are various government grants which even enable you to export your products at affordable rates, provided that your product stands out in quality factor.
Ways Of Funding Small Businesses:
You can generate funds for your business is two ways: equity funding and debt funding. Equity funding means sharing the ownership (or a part of the ownership) with the investor. Debt funding is the way in which you borrow money for your business but you don’t share your ownership with the investor. Debt funding can be tricky sometimes, as there are harsh punishments if you or not able to repay your debt.
There are various sources of both equity and debt funding, some of them are:-
1) Self— When the entrepreneurs generate funds for their company through their personal resources, it is termed as self-funding. Entrepreneurs usually invest their personal savings or bear personal debts to fund their start-up. In some cases, they might also have to sell their properties to generate funds.
2) Angel Investors — This is one of the most ‘trending’ ways for fund generation. Business tycoons come together to fund a start-up by providing all the funds and resources required to kick-start the venture. They may demand some equity which is usually negotiable. The investment depends on the quality of your business idea.
3) Relatives — If you think you have enough trust and comfort level with your family or friends, you can go for this kind of funding, where your dear ones are either your business partners or lenders. However, this method is not seen as an ‘ideal’ one, as there are a lot of sentiments connected within a family or a close friend circle. Failure or disputes in the business may cause your personal relations to suffer.
4) Bootstrapping — In the bootstrapping method of funding, the business is able to fund itself. The profit generated by the business is used up by the business itself to further improve itself.
5) Online — When everything is available online, why not funding? Cloud funding is one such way of generating funds where people from all groups can pitch their ideas to get investment from the interested ones. There are various sites available for such funding where you introduce your idea and avail the funds if you are successful in convincing those investors online.
6) Business Partners — You can also convince people to become your business partners. Moreover, it is not necessary that the business partner has to be from your trade. You can discuss the strategies related to the partnership and implement those in decision making.
7) Venture Capital — In this kind of funding, the investors are looking for a large share of the business owners. If you agree to their terms, it can prove to be a good source of funding.
8) Government Funding — There are numerous plans initiated by the government which targets at funding small business owners to start their company. You should keep checking the government sites to keep yourselves updated with the latest offers from the government.
9) Banks — Needless to say, Banks have been the primary source of funding for decades. You can still opt for banks for funding your start-up.
10) Ancillary Funding — There are certain big companies looking to fund small start-ups. They often suggest the start-ups run on the investors’ name. When the start-ups turn big, they get automatically merged to the bigger company.
Therefore, there are ample ways in which small businesses can thrive upon. These financing options are extremely well suited for small businesses and results in prominent turnouts for these companies. Thus every government should encourage more and more start-ups and idea to come into the light and become a reality.