One of the biggest reasons people don’t start a business is they don’t know how to find the money to start in the first place. It’s a major hurdle every new entrepreneur faces time and time again. Like, you’ve got a great business idea but how do you get it off the ground. It’s really important to know some details about funding a business.
Well, today I’m going to tell you some of the ways of financing your business startup. But before you run to your family and friends, investor or bankers asking for money, there’s a little bit of background work that you need to do like deciding how much money do you need for your business, do you need to have a business plan or what is your business structure going to be.
Let’s move on towards various options you can choose for funding a business.
The first way is to finance your business out of your own pocket. Savings and personal resources are the primary sources of capital for the new businesses. You cannot start a business without your own money and there’s no bank or investor that is going to give you any money unless you’ve got some of your own money on the table. If you don’t have any cash in hand, you can simply sell some of your high- priced items that you don’t need to raise more money.
Do you know there is an agency of the United States government that can help you succeed in your business? Yes, we are talking about the Small Business Administration. SBA has helped millions of entrepreneurs start and grow their business by providing them loans and they can help you too. Because it is the job of the SBA to get more businesses in business, SBA loan standards are eased and thus, qualifying for an SBA loan is different, and easier, than qualifying for a traditional bank loan.
Get a bank loan
The first place people usually think of when they want to get outside funding for their business is a bank, and that makes sense because Banks are in the business of lending money, and they are good at it. Banks can provide you with an overdraft, or unsecured and secured loans.
Banks are the most traditional and conservative ways to finance a business, but they’re the hardest loans to obtain especially, in case of a new startup business.
Crowdfunding for funding your business
Without a doubt, crowdfunding is on the rise. You can use various Crowdfunding sites such as kickstarter.com, Crowdcube, Seedrs, Indiegogo, and Circle to raise money at a relatively low cost for your small business. In raising money from the crowd, you not only secure your capital but also attract the attention of potential customers.
Ask money from family and friends
Raising money from family and friends is the most common way to finance a startup. Family and friends are the people you can trust. It is a good idea to have a proper business plan before approaching them and convince them to pay you money to start your business. Do consider having a written agreement, though, that covers the borrowed amount and the payback schedule.
This is not something that I would ever recommend, but, it’s certainly an option that may be available to you and that you should consider especially if you don’t have any other financing options available. Opening a new credit account to fund your business is some serious risky business and can be harmful to your credit score. However, you can use credit cards in case of urgent cash flow requirements. But, you should also be aware of the high-interest rates that come with the credit cards. And so it can be a very expensive way for you to obtain money for your business. But, if no other financing option available to you, and you completely understand the risk, then utilizing a credit card to fund your business may a viable option for you.
Angel Investor and Venture Capital
Angel investors and venture capitalist invest their money in small businesses. They have money through their own businesses and they’re looking for opportunities to get a high return on their money. Before approaching an angel investor, you must have a solid plan, exit strategy to convince an angel investor to fund your business. Raising funds from angel investors is a challenging path for startup founders, but you only need one investor to get you started.
There’s no uniform “startup fee” for every business. Different businesses will have different needs and therefore, it’s important to decide whether you want to start your business with little money or a huge amount before you start looking for alternative methods. Make sure you always know the consequences when funding your business.
Don’t let your lack of funds stop you from starting the business of your dreams. It may seem impossible, but one way or another, you need to believe you will find the funding your business needs to get off the ground and succeed.