Are you planning to start a small business? Launching your own business gives you the opportunity to be your own boss. You’d think that a brilliant idea would be enough to create a successful business. But that’s just the starting point. There’s a lot of work to be done before you’ll get to enjoy the perks.
One of the first tasks on the agenda is to arrange finance. In this post, we’re sharing some common ways you can acquire funds for your business. Take a look.
1. Employ Your Personal Savings
Employing your personal savings is one of the easiest and quickest ways to finance your business. The advantages of this source include complete ownership of your business and no debt repayments. However, putting your life savings is risky as you can lose everything if the business fails.
2. Consider Selling Your Belongings
If you haven’t saved enough money, you can still accumulate funds by selling your personal belongings. So what can you sell? To sell your drone, music system, computer, and other electronics, check out Gizmogo. Precious jewelry is another item that is easy to sell. However, if you really believe in your business idea, maybe selling your car can be a viable option for you.
3. Ask Your Friends & Family
If you don’t have personal savings or creditworthiness for a bank loan, you should ask your family and friends for a loan. Being your family, they might even exempt you from paying interest. On the downside, anyone investing in your business is likely to offer unsolicited business advice. Also, borrowing from family and friends can turn relationships sour.
4. Use Your Credit Card
Do you have short-term financing need? Credit cards are a good but also expensive option in such cases. It’s suggested to use your credit card only if you’re sure that you’ll be able to repay on time. Otherwise, delayed payment will impact your credit score. A low credit score will make it difficult for you to borrow in the future.
5. Take Out a Business Loan
One of the most common ways to obtain finance for launching your business is by taking out a business loan. Having said that, getting a business loan from a bank is not an easy task. In addition to strict eligibility criteria, banks also demand detailed business plans and collateral.
6. Payday Loans
What do you do if your low credit score is keeping you from qualifying for business loans? If you have a short-term need, you can consider taking out a payday loan. However, payday loans should be reserved for extreme situations. These are expensive loans that can push you into a debt trap.
7. Explore Crowdfunding
Crowdfunding involves putting your financing needs on a platform and requesting the general public to contribute funds. Compared to other sources, this is an economically feasible option that won’t incur any interest. But that being said, there is neither an assurance that people will contribute nor a fixed timeline for receiving the funds.
8. Apply for Business Grants
A business grant is financial assistance offered by governments and various organizations. Though it’s quite challenging to win a business grant, it’s something you should definitely apply for. The biggest advantage of securing a business grant is that you don’t have to pay anything back.
9. Get a Silent Partner
If you’re reluctant to give up ownership of your business, you can think of getting a silent partner on board. A silent partner will invest in your business but won’t have a say in day-to-day operations. But as the partner is investing, they’ll have a stake in the business and a share in future profits.
10. Seek an Angel Investor
As your business is a start-up, many investors will be reluctant to invest their money. However, you can seek capital from an angel investor. An angel investor usually invests in a venture in return for equity. You’re not bound to repay this investment.
Since your business is in its early stages, it might be deemed risky but an angel investor is willing to take that risk. In addition to capital, an angel investor also brings guidance and expertise to the table.
While the guidance is helpful, you have to carefully consider compatibility before associating with an angel investor. An angel investor is likely to have a lot of opinions and control. So, accept investment from someone you can see yourself working with.
Also, in theory, getting an angel investor onboard sounds like a piece of cake. But in reality, there are strict criteria your business needs to meet.
11. Venture Capital
Venture capital is quite similar to an investment by an angel investor, just on a magnified scale. If you get VC funding, not only will your business receive abundant financing but also access to a talented group of people that will offer their expertise.
Again, it’s not easy to get VC funding. Only the crème de la crème of business ideas can win over venture capitalists.
12. Home Equity Loan
Do you own a home? This gives you the opportunity to take out a Home Equity Loan. Unlike a business loan, a Home Equity Loan is much easier to obtain. Despite the ease of procurement, it’s something you should think about thoroughly before proceeding, as the inability to repay can cost you your home.
13. Product Pre-Sales
If there is no way for you to take out a loan or bring in an investor, you can generate money by selling your products even before launching your business. In addition to generating cash, pre-sales can also generate market buzz for your brand.
With this source, it’s crucial to ensure your product is fully developed for the market. Also, all the money earned should be invested right back into the business
The Bottom Line
Financing a business is often quite challenging and also a crucial stage for any business. So take your time to explore all the available options and find the right one for your business. Hopefully, you find our tips helpful for financing your new venture.