One of the most difficult aspects to getting your business off of the ground is finding the right funding to help propel your business forward. The right (or wrong) financial situation can make or break a business. In fact, the wrong financial situation can cripple a business before it even begins, never giving it a chance to break into the business community.
Though many new business owners believe the only way to fund their business is by their own hand or through a business loan. While those are viable options, there are plenty of ways to fund your business:
Personal Savings
As mentioned above, one method available to funding your business is using your own personal savings account. Because a new business can put such a strain on your savings though, it is a smart idea to have your financials in order, including financial investments, bills, and other financial obligations. Many financial advisors suggest setting aside enough finances to pay your expenses for at least one year, using what is left in your personal savings to fund your business.
Family
Though many consider it awkward to ask their family or friends for a financial loan, for some, it is an option to keep in mind. For those who do consider asking their family or friends for a loan, it is advisable you put together a contract that details the specifics in order to avoid any problems down the road.
For instance, make sure to disclose the terms of the agreement, whether or not they have a say in business matters, and your repayment plan. By going over everything up front, you can avoid a fallout later.
Bank Loans
Bank loans are more and more difficult to come by in this day and age, especially since the economy is still trying to recover from the financial turmoil a few years ago. However, though it is more difficult to snag a bank loan than it used to be, it is not impossible, especially if you find the right bank.
When searching for a small business loan, look into banks that offer loans to small businesses, as they typically require a smaller down payment. For a startup company, a smaller, more manageable loan is incredibly helpful, as it helps to ease the financial strain a new business can put on you.
Lastly, be prepared when speaking with a loan officer about a small business loan. Bring your business plan, business financials, and your personal financials. Because they are more difficult to come by, it is key you show them you are serious about your business.
Angel Investors
This type of loan is not for every business owner, as angel investors will only back a business in exchange for some sort of equity or for partial ownership. If you decide to go with an angel investor, be prepared that though you may receive the funding you need, you are also receiving a partner. For some, that is a fine exchange while others may struggle dealing with a partner.
Government Grants
Some businesses may be applicable for a government grant, which, in essence, is free money that does not need to be repaid back. For many non-profits and other charity-related organizations, government grants are a great way to get the business rolling. There are grants for all sorts of businesses, including grants for minorities, women, etc.
Crowdfunding
A more popular method to backing a business financially is the use of crowdfunding, which is a virtual fundraising campaign. Many small businesses and entrepreneurs use crowdfunding to raise a small amount of money, which, over time, can add up.
By using a site like GoFundMe or Kickstarter, you can easily set up a campaign detailing your business and what you need money for. Friends, family, and others who are interested in your company can donate to your cause. When selecting a crowdfunding site, make sure you have read through all of the details. Some sites, for example, allow you to keep the money you raised, even if you did not reach your goal while others will cancel your campaign if your goal is not met.
These resources can help you find the finances you need to open the doors of your small business.
