Starting a business is a big step for any individual. It requires taking risks such as leaving a regular job for an uncertain financial future. However, the chance of getting a bigger income while pursuing what you love best drives people to set-up their own business. Your success depends on how well you plan it from the start-up stage to sustaining it.
Finding ways to fund your business is a critical part of the planning stage. Funding does not only need initial capital to help the owner during its start-up period but also funds that will sustain the operations all throughout. Capital is hard to come by considering today’s economic landscape. Hence, entrepreneurs have to think out-of-the-box to exhaust all means of financing possible.
If you are determined to start your business immediately, here are some of the most realistic ways of acquiring capital.
1. Small Business Loan
The SBA (Small Business Administration) supports entrepreneurs who want to start their business but have low chances of getting loans from banks. It could because of a low credit score or a high-interest rate.
Pros: Small business loans are granted by banks and credit unions at a lower interest rate and backed up by the government by default. Because it is being monitored by the SBA, banks do not ask for part ownership in exchange for providing finances. There is no need for profit sharing.
Cons: Although getting an SBA loan is accessible through banks, business owners have to go through a lengthy and detailed application. Some of the requirements are relatively unnecessary and just prolongs the process. In the end, banks do not guarantee a 100% grant to your desired amount of capital. They may grant 70 to 80 percent of the sum you applied for.
2. Credit Card
One fine way of bootstrapping your business is through leveraging your personal source of funds such as savings accounts and credit cards. It is a risky but effective choice considering you have to charge ahead and pay it off by yourself.
Pros: Credit cards help you out on financial bumps. It is an easy source of funds as half of start-up businesses are financed by these. You just have to use it responsibly.
Cons: A credit card with a sky-high interest can bury you financially for years. Falling behind your payment or paying just the minimum amount will get you into a hole that you can never get out of.
Crowdfunding platforms such as Kickstarter or GoFundMe allows you to reach out the masses to soliciting funding. You create an effective pitch that will encourage people to contribute to your business goals. These platforms are a great venue to start your fundraising.
Pros: The most certain benefit of crowdfunding is the actual money you are going to get. You can earn without giving up profits. Furthermore, getting access to that huge network exposes your business to local and international backers.
Cons: Crowdfunding platforms all have their own fees. From 8% to 12% of what you raise, you have to give it to Kickstarter, for example. Certainly not the amount to be taken lightly especially if you are on a tight budget.
4. Partnership & Investors
With the right timing and the right network, attracting angel investors and getting partnerships will help you succeed in your business. Friends, family, and exposure to international investors through crowdfunding platforms, these are the easiest route to open your doors to funds and capital.
Pros: Business angel financing does not need any collateral to get the funds you need. Finding an angel investor gives you the opportunity to build a long-term relationship that will benefit you and your business.
Cons: Attracting an angel investor does not guarantee funds and a long-term partnership. No matter how positive your initial conversations will be, it is always their choice whether to make the investment or not.
No matter what kind of business you want to start with, exploring these and other funding avenues will give you an idea on how to reach your financial goals. One size doesn’t fit all so, at some point in your business career, you may need one, two, or all of these methods to maintain operations and maximize your company’s profitability.