When you develop a new business idea, it is natural to be excited and ready to jump into the work straightaway. Unfortunately, before any work can be done, startup financing must be secured to help the business get off the ground. New business owners wonder where to turn to find this necessary funding, so here are some options that should be investigated, combined, and used to create sustainable funding until the business can start generating a profit. Before researching these financing options, make sure that you have sat down and written a business plan with cost estimates so you know exactly how much you are going to need.
The first place to begin looking is in your own bank account. How much capital are you personally able to invest in your new business? Perhaps you have been saving for a while to begin this venture, and that will be very helpful. Decide what you are willing and able to personally risk financially.
Once you have taken a good hard look at your own financial situation, you can consider asking friends and family to help with some expenses. Many people may find this difficult, as it can be awkward to ask people for money.
To help avoid this problem, make your pitch as professionally as possible. Use your business plan, market research, and projections to let them know exactly what you will be doing and where the money will be going. Give them the option to say no, and be sure to take no offense if they do, you never know another person’s true personal financial position.
To help fill in any gaps, an angel investor may be an option. These investors help to provide start upfunding for businesses as an investment. They most often like to work with larger companies, but speaking with a financial advisor is probably the best way to determine if this option is right for you, and how to find such an investor.
Another option may be crowdfunding, when people network together to fund projects from businesses to disaster relief. The internet can be an excellent resource for raising awareness about your business and generating funds. There are a number of websites you can use to create a fund for your project. If you get one hundred people to donate twenty five dollars, you just made an easy $2500 towards the start of your small business. When you give friends the chance to donate in much smaller amounts like this, you are likely to get a stronger response.
Venture capital allows new companies that may not have the history needed to raise money from more traditional sources to get funding. The venture capital fund will buy this high risk equity from the company to help generate start up funds. This is another option that should be discussed with a financial advisor to see it is right in your situation.
Finally, there is the traditional bank loan. Applying for a small business bank loan can be a difficult task. You need to have excellent credit and preferably assets to back the loan. If you only need a few hundred dollars, a microloan is much more easily secured. One option may be to get a line of credit, which will not charge you interest until you spend the money, and gives you a little more freedom about how much you will actually be using.
Opening a small business is an exciting and stressful situation. Coming up with the money to fund the venture is only one part of the equation. Hopefully this list has given you an overview of some of your options when it comes to finding funding.
Nicola Byrne writes for Calverton Finance – a UK based invoice factoring company who specialise in offering startups and SMEs services like payroll finance and confidential invoice discounting.