The independent newspaper of the University of Iowa community since 1868

The Daily Iowan

The independent newspaper of the University of Iowa community since 1868

The Daily Iowan

The independent newspaper of the University of Iowa community since 1868

The Daily Iowan

Financing and money transfers for your new startup

When opening their startup, especially if it is the first, owners of future businesses often face a huge number of difficulties. However, only if they pass them all at the first stage, will they have a real opportunity to develop further. The difficulty that scares most entrepreneurs the most is the need to face all the complexities of money transfers.

How to arrange money transfers

As a rule, a startup needs to finance itself from the very beginning, and then as part of its development. There are several solutions for financing a startup: equity, fundraising, loans, and financial assistance, but they all require organization and consistency, and therefore the need to take care of convenience in advance. The most successful solution is to create a transferra business account in advance through which it will be more convenient for you to manage payments for your business. This way the whole process will become much simpler and therefore less stressful.

Organization of startup financing

The main difficulty for a startup is to convince financial partners, such as bankers or investors, that your project really is an investment, without risk, since the percentage of failures in innovative projects is especially high.

The first source of financing corresponds to the capital that startup partners can raise and invest in the company. Such a financing decision depends on the financial capabilities of the partners. Contributions may include other goods besides money. For example, it could be a contribution from a web application or a research project. The minimum amount of equity is necessary in order for the startup to find other sources of financing.

Capital for your startup

Start-up capital consists of raising funds to start an activity or launch a service or product. To successfully raise funds, you need to convince investors. The latter will be interested in the potential added value of the project. To do this, they will analyze the proposed concept and the team gathered around the project. A preliminary assessment is carried out.

Fundraising allows you to finance yourself with your own funds. Thus, the company does not get into debt. The main disadvantage of start-up capital is that a startup is still poorly evaluated when it is at the start-up stage. Collecting too much money will significantly weaken the participation of the founding partners, which will make it difficult for subsequent fundraising.

Help and contests to help startup finance itself

There are many systems that help a startup get financing. To find out about assistance and other support measures, you need to contact the bank.

Then the startup can also participate in one or more business creation contests. There are many contests held every year, and some will definitely be suitable for the project. Participation in such a competition may allow you to receive a financial contribution or meet with investors.

A bank loan to finance a startup

A startup can also take out a bank loan to finance its launch or development. In order to get a bank loan to launch a startup, partners must make a sufficient contribution of their own capital. This contribution should often be at least 20% of the total funding. Otherwise, the loan request is likely to be rejected. Then the credit institution will request guarantees.

The disadvantage of this method of financing is that the startup will have to repay the installment loan fairly quickly. If the activity has not started, it risks affecting its cash flow. In turn, no new partner will enter the company’s capital.

Financing the development of a self-financing startup

Self–financing is a possible solution for financing the development of startup activities. On the other hand, at the initial stage, the company does not yet generate sufficient income.

In practice, it is very difficult for a startup to develop solely through self-financing. Often, their own resources do not allow them to follow the planned development plan. Once launched, a startup needs rapid growth. To do this, significant resources must be mobilized.

It is not easy to create a startup, starting from coming up with an idea and ending with its development and presentation of the final idea to the entire market. Attracting investors and getting started is an even more difficult stage, and organizing all these financial flows can just drive you crazy, so the main thing is not to panic, have a clear strategy, and plan and arrange all money transfers in advance.

More to Discover