Merits And Demerits Of Funding Your Startup


Nowadays, entrepreneurs are always seeking ways to empower their businesses economically. For this, they approach several funding sources such as angel investors, startup incubation support, banks, and so on. With the increase in competition, there are a couple of obstacles that come in your way. However, one can somehow get started after obtaining the required seed capital for his or her startup. Although all the entrepreneurs think of getting money, they aren’t aware of the merits and demerits that come along startup funding. In this article, I will tell you the merits and demerits of funding for your business.

Merits And Demerits Of Funding For Your Company

Merits Of Funding Your Startup

1. You Easily Reach The Business Capital

There exist several financial institutions that are focused there to provide funds. Such funds can be in the form of a bank loan or a fund from an institutional investor. They can support you with the seed capital as per the size of your business. If your business scaled more after earning some profits, you can win their trust in the future. With startup funding, you also access expertise from various professionals from financial institutions.

2. You Get Support In Other Matters

Your journey to the corporate world is not as easy as pie. Also, after obtaining startup capital, you cannot expect success overnight. Financial institutions provide other necessary resources besides offering funds. Their professionals can help you out in other matters such as legal matters, accountancy, guidance, and technology. Thus, financial institutes ensure your business runs smoothly. 

3. They Boost Your Network

Financial institutions have the potential to attract investors. Some investors approach institutions to seek the best returns on their money. So, if your business is giving outstanding profits, financial institutions can list your business before them. With this, you get more chances to scale your company to the next level. Also, they could have brilliant ideas that could be fruitful in the future. 

4. You Get Support For A Long Time

When your company starts observing progress most of the time, it is likely people and organizations will expose your business to the outside network. Thus, they will open new doors for you to access more wealth. From these networks, you can come in contact with angel investors and venture capitals, which have transformed startups to some of the biggest players in the market.

Demerits Of Funding Your Startup

1. You Deal With External Pressures

You should know that all are offering resources for their own profits. From time to time, they will monitor your performance. The investors could frequently make decisions that are not favorable to your business. However, you should know which decision to follow. Also, investors can dominate your business according to the amount of seed capital invested. 

2. You Can Have Less Ownership

Just remember that things belong to those who own them. This saying fits correctly in the case of your business. Financial institutions and investors will take your management control in their hands after fulfilling your initial requirements. Sometimes, they could exercise more power over your business with less seed capital. Thus, you should make everything clear before giving ownership. 

3. They Can Waste Your Time

If you are unlucky and approach wrong people, they will certainly consume much of your time and resources. Entrepreneurs can sometimes become the victim of fake investors that appear to be lucrative ones. Thus, entrepreneurs will end up wasting their own money instead of securing it. 

4. Investors Can Burden You With Agreements

You have to deal with several paper works while starting your business and obtaining funds for it. According to these terms and conditions, investors are liable to receive each penny they invested in your business. Before giving access to their resources, investors require you to sign their lengthy documents. In some cases, you could end up signing the wrong documents.

How To Protect Your Business

There are measures you can take to protect your business.

1. Go through all the paperwork carefully.

2. Take help from your friends and family members

3. Ask for doubt from genuine resources. 

4. Have a record of every detail for your business.

5. Don’t be overly greedy.

Final Thoughts

In this age, when people are outsmarting everyone, having some experience becomes essential. You should be aware of the merits and demerits of funding before getting into the corporate world. No one will help you if you are in the wrong direction. Investors are always there to provide seed funding for new startup companies. You should be ready to face every consequence, whether good or bad. Analyze the market and wait for the time. No doubt, investors are ready to give money if you have something to offer out of the box. Lastly, you should know how to entice them in giving the required money and other support.