Starting a business requires an upfront investment or infusion of capital. That’s why so many entrepreneurs turn to grants and funding as a way to get their businesses off the ground. This article discusses funding and grants for app development companies.
Before Seeking Funding for your App Development Business
Before obtaining funding for your app development business, you’ll need to do some preliminary work. First, you’ll need to create a business plan and determine how much funding you need.
You should also open a business bank account. This will make it easier to track your expenses and keep your finances separate from your personal assets.
Common Funding Options for App Development Companies
There are numerous business financing and funding options available for an app development company. The most common ones are:
Bootstrapping an app development company is often the best option for new entrepreneurs, as it doesn’t require any outside funding. With this option, you can use your personal savings to cover initial costs such as hiring developers, purchasing equipment, and marketing your app.
This option has the advantage of being relatively low-risk since you’re not borrowing money from anyone else. However, starting and sustaining a business can sometimes be difficult without outside investment.
Personal Loans from Family & Friends
Another common financing option is loans from family and friends. This can be a good option if you don’t have enough money to cover your start-up costs. However, it’s important to establish a clear repayment schedule and to make payments on time to avoid damaging relationships.
Business Loans from SBA or Local Bank
The Small Business Administration (SBA) offers a variety of loans for app development businesses, including start-up loans, new equipment financing, working capital loans, and real estate loans. These loans are issued through local banks, and they come with relatively low-interest rates. You can use traditional bank loans and lines of credit to fund your app development business.
Business Credit Card
A company credit card is a good option for financing app development businesses. It allows you to borrow money up to a certain limit, and you can use the card to pay for expenses such as marketing, supplies, and travel.
The advantage of a credit card is that it can help you build your credit history and score as a business. However, you should make sure to pay off your balance each month to avoid accruing interest charges.
Angel investors are individuals or groups who invest in early-stage app development businesses in exchange for an equity stake in your company. This can be a good option for business owners who want to grow their business quickly, as angel investors can provide financing and mentorship.
However, angel investors often expect a high return on their investment, so you’ll need to be prepared to give up a 10%-30% share of your app development company.
Another option for raising equity is to seek funding from venture capitalists (VCs). VCs are firms that invest in high-growth businesses in exchange for equity. They usually invest larger sums of money than angel investors and often have more experience in the tech industry.
This can be a good option if you’re looking for a lot of capital to grow your business quickly. However, you should be prepared to give up a significant portion of your company (30% – 50%) to VCs. Also, most VCs will not consider funding a mobile app (or any other company) until it has achieved initial traction (customers, downloads, and revenue).
Other Funding Options
Several funding options are available for app development businesses, including crowdfunding and grants. Grants are available from the government and private foundations. Grants are only applicable if your mobile app serves specific needs.
Create Your Business Plan
As mentioned above, you will need a solid app development business plan for many of these options to make a strong case to potential investors or lenders. A well-written business plan can help you secure funding and grow your business.
Fund Your App Development company
There are a variety of options available for funding an app development company. The most common ones include bootstrapping, debt financing, business loans, and equity financing.
You should carefully consider the different options and choose the one that best suits your needs. Additionally, you’ll need to create a business plan to make a strong case for potential investors or lenders.