The toughest part of starting a business is financing it. You have loads of startup costs that need to be paid for. Thankfully, there are many ways you can finance your business, the best of which are listed below:
Use Your Savings
The most obvious way to finance your startup is to use your money. If you follow certain financial tactics, then you should have a lot of money saved up. The whole point of a savings account is to give you some extra funds when you might need them. If one day, you wake up with an amazing business idea, your savings can help finance it.
The main benefit of this is that you’ll be the sole owner of your business. You’re going to own 100% of the shares, and all the money you make will go to you. However, the obvious downside is that it’s a big risk. If things don’t go to plan, then you lose a lot of your own money. Plus, you might not have the funds to finance your startup completely. In which case, you may need additional help anyway. But, if you can safely afford to finance your business using your savings, then I highly recommend taking the risk.
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Get A Loan
For many people, a loan is the best way to finance their business startup costs. And, there are a couple of ways you can do this. The obvious way is to apply directly for a business loan. Banks will often offer loans to entrepreneurs that come through their doors. However, obtaining one is no easy feat. You can’t just waltz through the bank doors and expect your business loan to be approved. You’ll have to go through a rigorous application process and tell them about your company. Let them know why you need the loan, and what the money will be spent on. If you’re honest with them, you’re much more likely to have your loan approved. Once this happens, you’re given the money and will be told a repayment plan. It’s important that you choose a loan that doesn’t have high-interest rates as this can cost your company lots of money.
The second way you can use a loan is in conjunction with another finance option. You may have the funds to finance a lot of your business startup costs. However, you might fall short a couple of thousand dollars. In this case, you can apply for a personal loan to boost your financial situation. There are installment loans you can get that allow you to borrow money almost instantly. Then, you can use that to pay for something like office supplies, or employee wages. The best thing is, it won’t take long to repay. However, I must stress that this loan option is good for people that already have a decent financial backing and need a little extra push. If you need a loan to finance your entire startup process, then a business loan is the better option.
Find An Angel Investor
Angel investors are perhaps the most convenient way to finance your business. An investor is someone that’s willing to pump their money into your company. You tell them how much you need, and they’ll either agree or hit you with a counter offer. The huge benefit of this is that you have to spend very little of your own money. In fact, you might not have to spend any at all. And, you won’t have to repay the money they put into your business. It’s their investment; they aren’t giving you a loan. So, the lack of financial burden can be comforting and lead to you making more money in your business!
The major downside is that they will ask for something in return. Normally, they want shares in your business. If they give you the money to finance everything, they’ll ask for a percentage stake in your company. This means that they partly own your business. So, when you make money, they end up getting a share of the profits. It’s important that you negotiate how much of a stake they have in your business. You don’t want to give up too much, but too little can result in them pulling out of giving less money. Find the perfect middle ground and you’ll be laughing.
I should also note that the only way you’ll find an angel investor is by pitching your idea. So, you need to work on the best business pitch possible. Avoid cliches and typical jargon. Talk about your company and cover all angles so they know you’ve thought things through. If you impress them, then you just might be able to secure financing.
Crowdfunding is another excellent way for you to generate the funds for your startup costs. There are crowdfunding websites out there that allow you to find people interested in your idea. You write a short pitch and try to sell your business to people. If they like your idea, they can donate some money to you. Think about getting friends and family involved to help you achieve your dreams. They can donate some funds and then share the page with their friends. That’s the key to success here, making people aware of your business. If you can share your crowdfunding page with lots of people, it increases your chances of generating money. The best thing to happen to you is if you go viral. Some of the best ideas attract celebrity attention, and they share it with their millions of social media followers. In the blink of an eye, you could have all the money you need to finance your startup.
The major positive of crowdfunding is that you’re receiving donations. This means you aren’t obliged to give anything to the people that donate. They won’t ask for a share in your company or for the money to be paid back. They’re just generous citizens helping someone achieve their goal. Having said that, you could consider giving people free products as an incentive to pledge money. It’s a good idea, but not essential!
Take a look at these finance options and decide which one is best for you and your business. There’s no right or wrong way to finance a business, just make sure you get the money however you can.