So you have a great business idea, but you need some financial help getting your business off the ground? As an entrepreneur you may face many challenges along the way, and finding the money to start your new business is one of the first ones. When first starting a business, you need capital to fund its inception, capital expenses, operational expenses, suppliers and many more.
Unless you have some savings built up or you already know people with deep pockets who are ready to invest in your business idea, you’re probably going to have to find ways to get funding for your new business. Here are some ideas on how you can raise the money to get your business started.
1. Friends and Family
Borrowing money from friends and family is probably the easiest and classic way to turn your business idea into reality. While it may be harder to convince investors or banks to fund your idea, your family and friends have a personal interest in watching you succeed and may be more easily persuaded to give your dream a chance.
Taking money from friends and family, however, can be tricky. If you do go to friends and family for loans, it’s a good idea to make sure that each of you gets sound legal advice to avoid personal conflicts, and be transparent with your goals, expectations and business plans.
If you have a great idea and you’re great at social media, crowdfunding might be an option for you to consider. “Crowdfunding” means raising funds through an online campaign.
Websites like Kickstarter, Indiegogo and RocketHub have become very popular with inventors, entrepreneurs and the general public in the past two years as it is also the safest option to finance your business. Your funders are not going to ask you for the money back. They just want you to deliver on your product or services.
3. Small Business Loans
Small-medium enterprises (SMEs) are a critical component of the Southeast Asian economy and in most countries in the region, banking institutions tend to be the main source of financing, offering different small business loan types to help entrepreneurs get started.
These loans can be a good way to fulfill your short term cash needs. Before you request a business loan, make sure you have a detailed business plan. You should also have an excellent credit score. Take the time to compare the different SME loans and microfinance schemes to see what works for your capital needs.
4. Personal Financing
One of the most common ways to get a business up and running is investing your own money into it. This is also called ‘bootstrapping’. If you have savings or own your own home and are willing to refinance or take out a second mortgage, then these are options you can definitely explore. Using your personal savings in the early stages shows investors that you have a long-term commitment to your business.
Getting a free credit report card will help you assess where you financially stand. Knowing this also will help you figure out the interest rate you will get on loans, which can give you access to affordable credit.
5. Trade Equity or Services
Looking to get some web design done for your business? See if you can barter services with a friend or colleague who you might be able to help with some marketing or freelance copywriting on the side, if that is your forte. In virtually every city, there are communities of fledgling business owners who can work together.
Network and speak with other entrepreneurs or small business owners, and see if there are mutual ways you can help to benefit each other’s businesses.
6. Venture Capitalists
Venture capitalists are private investors that finance high-growth companies. They are a limited partnership company that looks for businesses that have the potential to give a high return to their investors. If they decide on financing your startup, they’ll ask for equity in return.
When looking for a venture capitalist, you have to research their priorities regarding their venture capital fund in order to align your goals with theirs. This method perhaps works best for small businesses that have progressed from the start-up phase and are generating revenue.
7. Keep Your Day Job
This is perhaps one of the safest ways to fund your new venture, although it might mean being unable to devote the necessary time and energy needed to get your business up and running. However, your bills still have to be paid.
If you currently have a job that is meeting your expenses, don’t be in such a hurry to quit. Spend some time getting the business off the ground on the side, and build through the early, challenging phases while allowing your 9-5 job to pay your bills. This lets you stay true to your vision without needing to give in to financial pressure.
8. Product pre-sales
If your business is based purely on the selling of a single product, such as a homemade accessory for example, the easiest way to raise the money to produce the product may be to pre-sell it. A pre-sale means getting payment for a product before it even comes out. By pre-selling your products, you can be sure not to make too many and have a warehouse of unsold goods. If you’re sure that your product is good and will fulfill the promise you gave to your future customers, pre-selling your product is pure profit for your business.
These are just a few of the ways you can finance your new business. Regardless of the funding option you choose, spend time to clearly investigate all of the terms and conditions and make sure they suit your particular enterprise. You want to be sure that the choice you make to help your business today will continue to benefit your business in the long run.