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Is this the year you finally get your small business off the ground? Are you looking for a way to fund your business idea but feel a little lost? Fortunately, there are lots of different ways in which you can finance your small business.
Some small business financing ideas are safer than others. Some of us are in more fortunate financial positions and have access to funding others wouldn’t. No matter what your background, a small business shouldn’t take huge amounts of funding to get off the ground, and if you are passionate about doing it then you can find a way to earn extra money or reshuffle your finances in order to start a small business.
This is the obvious one. If you have saved already then they can be the platform for your business to launch. If you do not have any money saved then it could be a case of working for another 6-12 months, putting all the money you can to one side and preparing to launch your business. This gives you an opportunity for planning, too.
You might find it difficult to part with your savings, and you are risking them too. A small business could fail and you might end up with very little or even nothing left. However, this is the world of enterprise! The potential upside is the whole reason you are starting a business in the first place. Right?
Your savings are a good platform for starting a business due to the fact that it is your hard-earned money. It acts as a filter and allows you to “put your money where your mouth is”. You will think twice about investing your own money if you don’t actually feel like you are onto something successful.
This can be something that is hard to find. Think “Shark Tank” but on a smaller scale. An angel investor is someone you can pitch your idea to, and that might give you some money in return for part ownership of your small business. You can do this whether your business is new or you already have some track record.
An angel investor does not have to be someone from a hit TV show! They don’t have to be a millionaire, either. If you know of someone locally who is involved in a lot of different businesses, or owns a business and has an entrepreneurial spirit, this can be a very good place to start when trying to find someone to take a financial leap of faith in your idea.
An angel investor can be within your family, too! Friends and family are another good place to start when you are looking for financing for your small business. These can take on the role of angel investors if you wish.
You have a lot of options if you want to get your family involved, so you can reward them with a percentage of the business or you can promise to pay them back their initial investment. Friends and family are easier to persuade than strangers, just be sure to remember that they still need to be repaid in some way.
This is a method whereby you can reward people in many different ways for adding some funding to your pot. You set a goal for how much you would wish to raise and people can chip in an amount towards this goal. It is more appealing for some people who want to help but can’t justify huge amounts of money. Plus, they get something in return.
For example, if you were looking to start up a restaurant, and know that you have people who will chip in $50 towards your startup costs. You can let them do so and provide a voucher for them to use in your restaurant, as well as other perks like a permanent discount card. If you get 100 people to contribute $50, suddenly you have a decent amount of money to help you to get started.
You can give away equity in your business in return for your crowdfunding, too, but this depends on what you are willing to give away. The admin can get a little bit difficult for this, too.
This is still one of the most popular ways in which to start a business, and there is nothing wrong with this at all. Most businesses have to borrow money at some point and if you have faith in your idea then you shouldn’t be too intimidated by the prospect of borrowing.
Obviously, you should make sure that you are happy with the loan arrangement. You might be liable for the money if the business cannot pay it back. You should see it as a personal loan that you are using to start a business.
If you are fortunate enough, you can borrow money from friends and family, as we’ve already touched on. Just remember that they will still expect to be paid back, just because they aren’t a bank doesn’t mean you can keep the money.
Luckily, when it comes to financing a small business, there are a lot of schemes out there to take advantage of. Many government-backed lending schemes or state schemes can help with low interest rates and other benefits. The U.S. Small Business Administration has a number of lending schemes to help to get small businesses off the ground.
You may hear incredible stories of entrepreneurs starting businesses using credit card debt. This is possible, but not likely and in most cases not wise. You should try to secure a sensible loan that you know you can pay back in time.
It may be that a combination of the methods above can be used to finance a small business idea. You should consider the business in question and whether you know anyone with the financial means to help before looking to borrow from the bank, but there are many options and schemes for those who need to do so.
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