The last few years have seen major changes in how we work, and as more jobs become unstable, many people turn to entrepreneurship with the hope of gaining more control over their income. Still, a lack of funds keeps people from pursuing their business ideas.
While it’s a good idea to save money to put into your start-up, it’s advisable not to pump all your savings into a new business as it usually take a bit of time for a new start-up to be profitable. Ideally, you should have enough money to cover your living expenses for about six to eight months if you don’t have another source of income.
Unfortunately, as a new business owner, you’re unlikely to be eligible for a business loan from a bank, as banks typically only approve business loans to businesses that have been running for a few years and are financially stable. Even though a business loan may not be an option, there are other ways to fund your start-up. Each has its merits, so it’s up to you to determine which funding method works for you and your business.
Apply for a Personal Loan
Personal loans are a popular choice since there are so many types available, and unlike other loan types, you can use a personal loan for anything – even to fund a start-up. Because there are so many options, the first thing to do is establish your credit score. Knowing your credit rating gives you a better idea of the types of loans you can apply for.
Scores of 670 and above are considered high, so you will likely have no problem securing a personal loan from a traditional lender like a bank.
Budding entrepreneurs with a low rating can still secure personal loans but, in most cases, will have to apply for Bad Credit loans designed for people with poor credit. When researching loan options, remember that the terms vary according to your state, so CreditNinja VA loans may carry a different interest rate than a similar loan in another state.
Bring on a Business Partner
Another way to fund your business is by bringing on a business partner. However, before looking for a partner, you must consider the kind of partnership you’re comfortable with.
Having a partner involved in your business means sharing the workload and taking off some of the pressure. It will also require you to give up some control of the company. This might be a small price to pay because a skilled partner knowledgeable in the industry may help grow your business faster so that it turns a profit sooner.
If you decide to have an active partner in the business, you may still have some more decisions to make. For example, you need to determine who will be responsible for what, who will make decisions and how you will split the company. It’s imperative that you consider this carefully and know what you’re willing to negotiate on before you look for a partner.
If you’d prefer to run the business independently, you may want to consider drafting a contract that brings them in as a silent partner who only contributes money and gets paid dividends when the company is profitable.
Launch a Crowdfunding Campaign
The advantages of Crowdfunding are twofold – it aims to raise capital for your start-up and is also an excellent marketing tool as it puts your business in front of potential customers before you launch the company.
You can set up your Crowdfunding campaign on a Crowdfunding website and promote it on social media. The more people you reach with the campaign, the better, as the success of Crowdfunding relies on many investors investing a small amount rather than one investor investing a large sum.
You can reward investors by offering a free product, discounts or shares in the business. Successful Crowdfunding campaigns typically have a compelling story that grabs public interest or a story that resonates with your target audience.
Conclusion
It costs money to launch a start-up, but if you don’t have a large stash saved up, don’t despair. There are several financing options available to individuals who are new business owners. Popular choices include using personal loans, going into a partnership or launching a Crowdfunding campaign.
References
- Forbes: Startup Financing: 5 Key Funding Options For Your Company
- Freshbooks: 8 Ways to Get Money to Start a Small Business
- Startupgrind: 9 Realistic Ways To Fund Your Startup
- Investopedia: Crowdfunding
- Sableinternational: 7 Ways to Finance Your Small Business
- Ansarada: How to Raise Capital
- Startupdonut: 10 options for funding your small business
- Entrepreneur: 10 Ways to Fund Your Small Business
- Mycorporation: 6 Easy Ways to Raise Capital For Your Business
