Do you have an idea for a new business? If so, you’ve likely discovered that one of the biggest obstacles for most budding entrepreneurs is securing finances to fund a fledgling venture. Raising enough cash isn’t only critical for getting a small business off the ground, but it’s also an essential part of paving the way for future success and longevity. If you’re wondering how to fill your coffers so that you can launch your entrepreneurial dream, keep reading for six ways to finance your new business idea.
1) Try Bootstrapping Your Business
Frankly, the easiest way to get your business up and running fast is to use your own funds. This might mean dipping into personal savings, using low or no interest credit cards, or leveraging lines of credit on your home. Depending on the business you’re building, you can probably get things going with funding for three to six months of operating expenses. However, don’t drain your accounts to raise the capital you need. Since most start-ups don’t see a profit for the first few months, put aside living expenses to last at least a year. The downside to bootstrapping is that you may find yourself with a substantial amount of debt if the business tanks. Fortunately, you can read on for other ideas.
2) Ask Family and Friends
If you have someone in your life who has money they’re willing to invest in your project, it’s worth asking them first. This could be an older relative or even someone who truly believes in what you’re doing. The upside to asking people you know and trust is that you can potentially work out a deal that’s cheaper to pay off in the long run. Just make sure you treat this like a business transaction and have relevant contracts in place to avoid potential problems later.
3) Secure Personal Loans or Business Loans
Many entrepreneurs take out loans from banks and credit unions to get the money they need. These institutions are often willing to loan up to $500,000, depending on your personal credit history and collateral you can offer as security. Banks and brokers may require you to provide financial statements and projections. This option can be more costly than the other options on this list, but it can also give you some time to make your business profitable.
4) Make Use of Crowdfunding and Crowdlending
Crowdfunding involves the use of a dedicated crowdfunding website to ask large groups of people for capital investment in exchange for the product you’re developing or a gift. Although crowdlending works much the same, contributors to the fund expect you to pay them back. Popular platforms that facilitate this kind of fundraising include Kickstarter, Indiegogo, AngleList, Kiva Zip, and Accion.
5) Apply for Grants
You could be eligible for a state or federal government grant or funding if you’re willing to apply. Find out what kind of grant might suit your needs best by doing some research. Many programs also offer business training and consulting to help get you started and set on the path to success.
6) Don’t Quit Your Day Job
It’s not the most favorable option if you’re eager to quit your 9-5, but remaining employed while building your side-hustle might be the way to go. You’ll not only be able to relieve the financial pressure, but you can grow your business with fewer compromises. Sure, it might take slightly longer, but you won’t have to worry about paying your bills, and you can funnel any extra cash into your business.
Hopefully, you now have some solid ideas on how to find the money for your new venture. Building a new business is tough, but if you’re smart about the way you raise capital and fund expenses, you might be lucky enough to escape the pit of debt.