Starting a new business in the food industry can be quite challenging, especially without reliable sources of funds. Even so, that shouldn’t stop you, an aspiring entrepreneur, from putting your long-lived business idea into reality.
Getting funding for a food startup business may not be for the weak-hearted. Simultaneously, you shouldn’t give up on your long-desired business opportunity due to a lack of funds. Hopefully, you cannot miss an option that best suits your business idea or startup business. All you need to do is critically scrutinize your highlighted funding options before settling on the most suitable one.
There are plenty of options you can consider for funding a culinary business startup, depending on various factors. Here is an outline of how you can get funding for a startup business.
How to Fund Your Food Startup Business
Even with the many options, some sources of funds may work for your business while others may not due to their constantly changing economic conditions. Below are various factors you should consider when getting funding for a startup business.
Some funding for a startup business may be favorable in certain economic situations, while others may not. Confirm with a financial advisor the current economic conditions regarding funding for a startup business.
Your funding choice should match your startup business’s needs. Most sources of funds for a startup business, except when it’s your savings, need to be paid back even when it’s not through finances. Ensure to consider the repayment cost of your preferred source of funds.
Scientific Research & Experimental Development (SR&ED)
SRED refers to a systematic allocation of funds from the government to organizations strictly involved in nothing else but scientific research and experiments. If your upcoming business lies under that category, you’ll likely benefit from the SR&ED funding to finance your raw materials, equipment, and everything else regarding the business operations.
Governments undertake a specific procedure to ascertain which businesses are liable for SR&ED and separate them from the rest. SRED is probably the best way to get funding for a science-based startup business or company since the businesses aren’t required to offer any repayment.
Loans From Financial Institutions
Acquiring loans from financial institutions is probably the most popular way of getting funding for a startup business. The option requires you to acquire finances from a bank or other financial institutions to fund your startup business and repay later at a specified interest rate.
Loan funding has been a lifesaver to most businesses, but it remains equally risky if one defaults on loan repayment. Additionally, sometimes the interest rates may be too high for a startup business person.
You can confidently fund your startup business through your savings or resources. Since no third parties are involved, this has to be the most stress-free funding source for a potential business. If you don’t have any savings, you can sell, hire, or lease your valuable resources, such as land and machinery, to acquire finances for your startup business.
Additionally, you will enjoy full control over your business if you go for personal funding. However, personal funding for a startup business can be quite risky if you don’t have a backup source of income to replace the outgoing finances.
Angel investors fund a startup business in exchange for equity after a long while. They are simply business ‘partners’ who see the potential and determination in their co-workers and lend them a hand in the form of capital.
The good thing about angel investors is that they provide financial and management guidance to their business partners. Additionally, their means of acquiring repayment may not involve interest rates. However, with the current economic conditions where everybody is battling for themselves, it may be nearly impossible to find genuine angel investors.
Friends & Family Members
Another way to get funding for a startup business is by borrowing from friends and relatives. The good thing with borrowing from friends and relatives is that your close ones request little or no repayment for their ‘loans.’
Some friends and relatives love to see one of them succeed in the business world and thus will freely let go of their hard-earned coins to finance your potential business. Essentially, if a family member or friend requests repayment on their loaned funds, it would be best if you paid back as requested and on time to avoid ruining close ties.