For any entrepreneur or start up, one of the main issues is ways to fund your business. Not knowing how to find funds for a new business is one of the main reasons great ideas don’t get off the ground. It is probably the most taxing question of all, but you can take heart from the fact that there must be numerous ways to fund your business because new enterprises are formed all the time. Whichever route or combination of options you eventually settle on, the first thing to do is know how much you need. That’s step one in being realistic about your search for funding.
Many a successful business has begun with funds from its founder. Sir Alan Sugar is proud that he built his business from his own funds with a market barrow, continually ploughing his profits back in to grow his business in steps, taking a bigger step each time. It’s one of the classic ways to fund your business if your start up costs are minimal or you have savings. Remember, your savings have to not only cover start up expenses but your living expenses until you start making a living wage.
2 Business Loans
Thanks to some serious financial crises with banks all over the world, we know it is becoming harder to get loans. It’s incongruous that it’s easier for someone with bad credit to get a credit card than it is for new business to achieve start up funding. However, there are loans available. Do your research and look for banks and companies that actively advertise they support new business and be prepared. You need to have a well delivered business plan to support your application. Only apply to reputable institutions.
3 Personal Loans
The ways to fund your business using personal loans has a couple of options. You could obtain a reasonable amount of cash with a personal loan application if you claim its use is for home improvements or a car – remember to factor in interest and that you can afford the repayments. The other option – although fraught with potential problems – is loans from friends and family. This takes careful thought – do not accept your granny’s pension because even if you think you have a surefire business proposition, it can still fail. Do not borrow more than you could reasonably afford to pay back should your business not be successful and you have to go back into employment.
4 Grants and Donations
If you could find the perfect answer to how to find funds for a new business it would be grants or donations – basically money with no strings attached. You could pray for a miracle investor but you might as well buy a lottery ticket and hope. Otherwise, look to families and friends. Not all funding for a new business has to be in cash. Are there items you can beg, “steal” or borrow? Instead of birthday and Christmas gifts, ask for money to fund your dream.
In some ways bootstrapping is like the previous point. Bootstrapping is basically keeping your expenses as low as they can possibly be in the early stages of your business. It’s about using all your creativity and ingenuity to keep expenses in check and start up costs low. Buy equipment and tools second hand, work from home if possible and barter your services.
6 Government Assistance
For this I’m going to direct you to your respective government resources. Most western governments and some others have schemes to support new and fledgling businesses. It might be government backed loan investors or government grants. The best way to find out is simply to Google “small business funds.” Generally the government page will be among the first few listings.
7 Angel Investors
If you are willing to give away equity (part ownership) of your new company you may be able to attract angel investors – wealthy individuals or venture capitalists willing to invest and support start up businesses. Please note, these type of investors are usually looking for something they consider high growth – such as technology, biotech and alternative energy – but if you have a cracking idea and a sound business plan they might be interested.
The crowdfunding network is growing, although financial analysts still have the jury out on this way to fund new business. If you’ve got a creative project and something to offer in return that helps grow the business rather than drain funds from it at a time you need them most, crowdfunding might be an option.
Starting your own business is an adventure but it’s also a major decision. If you’re serious you will put the legwork in, do the planning and give yourself the best possible start by having a really good understanding of your start up and initial running costs. Whichever way you choose to fund your business, you have to convince the “money people” your idea is as good as it sounds to you. Do you have a winning idea for a new business you’re working on?
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