Funding the company in 8 ways
Often, after setting up a company, an entrepreneur does not have sufficient funds for its development. However, this is not a reason to give up your plans or borrow from family and friends. There are other possibilities for co-financing the company. Here are eight of them.
Method I: Joining the Business Incubator
The Entrepreneurship Incubator is a project supporting the establishment and development of companies, especially those that are or will be run by:
- social organizations,
- youth and students,
- entrepreneurs taking their first steps on the market.
The Incubator's help can be used in the initial stage of the company's operation and can be obtained for a year or even several years. Supporting companies can take various forms, the choice of which depends on the offer and capabilities of a given institution dealing with activities in the field of the Entrepreneurship Incubator. The basic offer of such services includes conducting various trainings.
A special type of Incubators are those related to technology. Their aim is to contribute to the creation of new jobs and increase competitiveness. Academic incubators are also exceptional, the purposes of which include, among others:
- supporting students and other academics in setting up micro-enterprises
- promoting the entrepreneurship of the aforesaid persons
- encouraging people associated with universities to create their own companies
- contributing to reducing unemployment among students and graduates of all universities.
All types of incubators are also to contribute to the development of the economy in Poland.
Method II: Applying for a bank loan for a small business
Contrary to the situation from a few years ago, banks no longer need proofs and sureties or property security from new companies. The current possibilities offered by financial institutions are divided into: unsecured loan and secured by a mortgage. The first type of loan can only be granted for a limited amount and the repayment time is quite short. In the second case, the person who wants to take out a loan must be the owner of some property. Although this condition may be difficult to meet, a mortgage loan has a larger possible amount of funding than an unsecured loan and is associated with lower costs.
Method III: Applying for co-financing of the company from the local loan fund
If any of the requirements set by the bank is impossible to meet by a novice entrepreneur, he can apply for help from a local loan fund. This self-government institution operates in some municipalities. Its most important goal is to grant loans to companies from the area of a selected commune.
Method IV: Investing in bonds
In addition to the types of loans mentioned so far, there are also bonds. They can also be a form of loan or credit, in which the entity issuing the securities for sale is the borrower and the acquirer becomes the lender. A characteristic feature of this type of financial support is that the issuer - the entrepreneur - sets specific conditions. Thus, bonds are a more convenient solution for a start-up company than loans offered by banks.
Method V: Applying for private equity and venture capital funds
Venture capital and private equity funds are concerned with investing in the capital market that is not in the hands of the state. The money obtained in this way should be used primarily for the return of working capital and the improvement of innovative technological solutions. The above funds can only be used in the first phases of the company's operation.
Although the names venture capital and private equity are often used interchangeably, they are different. The first type of funds relates to investments related to small-scale risky projects, and the second relates to investing money in larger and long-term ideas.
Method VI: Applying for subsidies from the European Union
European Union funds cover various funding scopes. As part of these funds, the following can be distinguished:
- European Regional Development Fund - its aim is to reduce the disparities in the level of development of regions in the Union and to strengthen the economic, social and territorial cohesion of the EU as a whole. The fund comes from, among others support for production and infrastructure investments and support for small and medium-sized enterprises.
- European Social Fund - the main goal of the fund is to fight unemployment in the Member States. Money from the European Social Fund increases employment and training opportunities. Its resources co-finance assistance for various regions and social groups, in particular for people at risk of poverty and for young people entering the labor market. Find out more about the European Social Fund.
- Cohesion Fund - This fund is intended for Member States whose per capita gross national income (GNI) is less than 90% of the EU average. Its aim is to reduce economic and social disparities and to promote sustainable development mainly through large investments in the field of transport infrastructure and environmental protection.
- European Agricultural Fund for Rural Development - this fund supports the transformation of the agricultural structure and the development of rural areas.
- European Maritime and Fisheries Fund - the fund supports the restructuring of the fisheries of the Member States.
In addition, the Union has introduced four financial instruments:
- JASPERS and JASMINE - finance technical support in the preparation of large infrastructure projects,
- JEREMIE - makes it easier for small and medium-sized enterprises (SMEs) to access microfinance,
- JESSICA - supports the development of urban areas.
Method VII: Applying for funding from the employment office
People who are just starting their business activity may apply for financial support from the employment office. This is possible because a small percentage of the contributions paid by the general public go to the Labor Fund. The funds collected in this way may be used by the unemployed registered in a given office. However, before applying for these grants, it is important to remember that:
- you cannot have any obligations with banks and other institutions dealing with granting loans (this does not apply to a situation where their installments are regularly paid),
- applications for funding cannot be submitted to another employment office,
- you must be registered as unemployed 12 months before applying for subsidies, and prove that you have not refused (without giving a specific reason) training, internship, training for the profession, as well as accepting a job offer,
- you cannot be punished for committing an economic crime within 24 months before submitting the application,
- you should not run a business or be entered in CEIDG 12 months before submitting the application
- you cannot have unpaid ZUS contributions relating to the previously run company or other negligence towards the tax office,
- you cannot be a person who, 12 months before submitting the application, has already received money to set up a company from the Labor Fund or from other sources.
In addition, when applying for funding from the employment office, you must correctly complete your application, develop a business plan and, above all, comply with all recruitment deadlines for this program.
Method VIII: Applying for financial support from Business Angels
Business Angels are wealthy people who are able to support the initial phases of companies' operations using their own funds. They propose their own contribution to a given company and buy a minority stake in it.
This type of financial support is provided by ordinary people who are no longer active in the business world, but still observe it with interest and want to support new, innovative ideas for their own reasons.
Starting companies and people with ideas for their own business are not easy on the market. Even when applying for different grants, they may face various obstacles. However, it is worth getting acquainted in advance with the detailed terms and conditions of all types of financial support that can be obtained and applying for additional funds. This may result in the desired development of the company, as well as acquiring new business contacts.