Starting a new business is a very demanding task, and it can become especially difficult when you don’t have the proper funding for it. And we all know that without a decent startup investment it is almost impossible to start any profitable business. Here is a list of six simple ways to finance your business so that you don’t have to give up on your dreams:
Personal savings can be a great way to finance your business, but it requires an extreme level of commitment. Personal savings can be attained through many means such as retirement benefits of liquidating luxury assets like cars or jewelry etc. You can also save funds from your personal income but using your own assets to finance your business requires a lot of courage. You will have to believe in yourself and work hard to make your business succeed.
Why are you expecting banks and lenders to take a risk on you when you are not willing to take a chance on yourself?
Moreover, the high-interest rates on loans make a personally financed business more lucrative if successful.
Sometimes the personal financing system is not enough to start a business. Partnerships can be a very effective way to improve your financial situation and odds of success. Bring together two or more people you can trust to work with you and share the risks and rewards. In this way, one person does not have to bear the troubles and burden of starting and managing the business alone.
Where forming a partnership has its advantages, it can also lead to legal problems in the future. To avoid such issues make sure that you consult lawyers and sign a legally binding document that specifies the roles of all involved individuals in the business.
Incubators and accelerators
If you value the advice and guidance of experienced entrepreneurs, the connections that come with them and you require an investment to start off your business then you should consider joining an incubator. Incubator companies provide startup capital to small businesses in return for a small piece of equity.
And they also provide you with access to seasoned and experienced entrepreneurs the advice of whom can be very helpful. YCombinator, 500startups, and Tech Stars are some of the top incubators and accelerators in the US right now which provide a variety of services.
Of course, you will have to show the working of your business and how it will be profitable to the incubator companies before they invest in you. So be prepared for that.
Loaning funds from a bank should not be your priority for financing your business, but still, it can be a source of funds on short notice. But keep in mind that these loans have to be returned with interest, and you have to place some assets as collateral in case you are not able to return the loan. The risks are high, and many people have ended up getting their homes foreclosed when they weren’t able to return their loans, and their businesses failed. So, only acquire a loan when you are confident in your business, and you are sure that you will be able to return the loans.
Make sure that you go through the terms and conditions of the loan and understand them before you sign the document.
Crowdfunding can be a great way for financing your business especially if you have a large network of friends and fans. Kickstarter is a website that allows you to create campaigns for crowdfunding. This financing trend is popular in social media personalities and YouTubers.
For example, there are many channels on YouTube that got a significant amount of funding from crowdfunding campaigns to fund their projects. Crowdfunding also allows you to promote your visions online and makes you able to take orders and pre-sell inventory before you have manufactured it. Crowdfunding is a low-risk method that generates both exposure and funding for your business.
Gathering funds from your friends and family members is a great way to get some startup capital for your business. Your parents, siblings and close friends are the people who know you best, and they understand your work habits and determination. This makes them easier to relate to your cause and become financial support pillars for your business.
While loaning money from your relatives seems like a great idea the downside is that you may end up ruining your relations with them. Miscommunications and failed businesses may break your friendships. Make sure that you construct a legally binding document and make sure that everyone involved understands the terms of the agreement.
David Simmons is a financial analyst and accounting expert. He has in-depth knowledge about setting up small businesses as well as creating profitable investments.