When you decide to go it alone and establish your own company, it’s easy to get swept up in the enthusiasm of your new endeavor. However, it should never be forgotten that you will need money to finance your company; how much depends on the business and how fast you want and need it to develop. There are many methods to get this money, and here are a few of them.
Bootstrapping
To be successful in your first company launch, you must have some money saved up that you can readily access or funds that you can acquire from friends or family. Bootstrapping or self-funding refers to the process of using personal savings or financing from friends and family.
Obtaining financing from family and friends is a potentially excellent method to get your company off to a good start. Friends and relatives are generally considered more flexible than other external sources when it comes to repaying your loan obligation. Although, of course, this doesn’t mean that you can forget about paying them back. Always ensure that you build your repayment needs into any budgets you may have. If you approach the appropriate friend or family member who supports your concept, you may obtain part, if not all, of the money you need to get your company off the ground.
Crowdfunding
The internet has allowed for the growth of a business like never before. Although you might initially only think of the internet as a way to market your business, perhaps through social media or by having a good website, there are other ways the online world can assist you and crowdfunding is one of them. Crowdfunding platforms allow individuals to pitch their company ideas to a community of investors or people eager to support their new business.
In essence, a person makes a business presentation on the crowdfunding site, sharing their company concept and its potential for development. If the concept is accepted by the platform’s crowd funders, they will make a public commitment to support the business plan and contribute money. Depending on how much you need, this could be a way to obtain all the funding necessary and begin your business.
One of the best things to come out of crowdfunding, other than the money itself, is a ready-made audience. The people who are investing are doing so because they are interested in your product or service. Once you’re up and running, they will be among the first to buy from you.
Find An Angel Investor
You may be wondering whether there is such a thing as an angel investment or an angel investor. It does seem almost too good to be true that someone would choose to invest their money in your business in this way – unlike crowdfunding, an angel investor is just one individual, and therefore it’s a much harder idea to get behind for many businesses owners.
However, there really are people who will want to do this; angel investors do exist. In order to gain their attention, you’ll need to have a foolproof, watertight, and up-to-date business plan. You’ll also need to know as much about your own business and the sector you’re working in as possible. You’ll need to impress the angel investor and instill them with confidence that, if they give you their money, you’ll be able to offer them a return on your investment. One way to prove that you’re serious and you know what you’re doing is to study for an online MBA which will help when it comes to finding an angel investor and will also give you plenty of knowledge about running a business.
Apply For A Bank Loan
Business owners who contact banks and other regulated lenders with a strong business idea may get financial support through a loan. The business plan must be well-structured in order to communicate everything possible about the operation, profit projection, and expected period of maturity.
With this method, you borrow a certain amount of money from a bank or similar lender and then repay it with interest over a defined period of time. Obtaining a business loan used to be quite simple but with so many regulations in place now, it has become more difficult. This is why it’s not something that will be open to every business owner, especially if you have poor credit or you have never run a business before. It can, however, have the best interest rates, which is why even if you’re not sure whether you’ll be successful when you apply for a bank loan, it is still worth trying as a cheaper way to borrow money for your business.
Small Business Credit Cards
A variety of credit card companies specialize in offering credit to the small business sector, and many provide unique advantages such as cashback rewards, airline points, and other perks. Some issuers need the card to be linked to the owner’s personal credit score and history, as well as a guarantee from the owner. Although this might make it easier to obtain the card in the first place, it also means that if you were to default on your payments or even if you were late paying the money back, your personal credit rating would be negatively affected. This is why, if you want to go down this route, you’ll need to think very carefully about how it could affect you personally as well as professionally.
The interest rate on outstanding credit card bills can also be very high, ranging from 5 percent to 19.9 percent, or even higher. The longer it takes to pay the money back, the more you’ll be paying and that could have an impact on your business. For a few months, some issuers will offer a low or no interest introductory fee which can help.
In addition, there has been a new generation of credit card issuers that concentrate on the small business sector and do not need personal guarantees, which means that using the card will not affect your personal credit score. These cards’ credit limits can be much larger than conventional credit cards and they often provide considerable incentives. However, as with any credit card, this will be the most expensive form of borrowing, no matter what the interest rate is and the idea should be approached with caution.
