Finding money to fund your business can be tricky. Whether you are looking to start a new business, or you simply want to grow an existing one, it’s always challenging.
In the UK in 2017, 660,000 new businesses were registered. More than 90% of these were small businesses. While it may be fairly commonplace to start a business, it doesn’t mean banks are any more willing to lend to you if you fall into this category. But it’s important not to give up if you’re on the hunt for capital. Here are five ways you can find funding for your business:
Self Finance Your Business
Depending on the size of your business and your savings, it can be possible to finance your company without relying on anyone else for help. You can do this through savings if you have any, selling personal assets, cashing in investments, or using a credit card, although this last option obviously comes with some risks.
Many experts will advise you to invest any savings you have as a first option in capitalizing your business. However, they may not tell you how much of your savings you should use. Should you use all of it, half of it, or a quarter of it? What’s too much of a risk?
This question can be tricky to answer. You may be tempted to take all the savings you have, but it’s not advisable. While your business may get off to a great start if you use all of your savings, it is better to take a less risky option and look for different ways of getting the difference needed to fund your business. You may still need some of that money for emergencies.
Aside from using personal savings, you could sell some assets. For example, if you have any real estate, bonds, or stocks, consider selling them. Remember to consider the tax implications linked to selling assets before selling them though.
Using a credit card to finance your business should be a last resort if you have no other options. It is a very expensive way to borrow and is advisable only if you’re using your credit to buy specific business commodities that you can be sure will make you some money in return, to pay the debt back in a short time period.
Also Read: Business Startup Costs – Why Does it Matter?
Seek Finance From Family And Friends
Your family and friends understand you better than anyone else. They are the ones who can see the passion and drive you to have for your business and won’t need to see your credit file to know whether you are trustworthy and capable. If you ask for help from family and friends, you don’t have to ask for a specific amount. Let them offer what they can.
Some may finance you without expecting you to pay the money back while others may lend you their money. Even if it is a loan, the chances are they won’t have stringent terms like banks. Some might give you their money at zero percent interest rates and without pushing you to the limit on things like repayment terms and specific dates. For these reasons, asking family and friends to help you out is a great way to fund business if you have people willing to do so.
Pepperdine University conducted a study in 2015 and found out that 68% of existing small businesses got funding from family and friends. The only downside of borrowing this way is that it will negatively affect your relationship if you fail to pay on time, so you need to think carefully about this method before asking.
Crowdfunding is also called online fundraising. Did you know that you could raise money for your business through online fundraising? Crowdfunding involves getting small amounts of money from donors who are interested in financing your project.
There are many online platforms where you can post details about your business and ask for funds to finance them. Some crowdfunding platforms will only release the money to you if you reach the total amount requested within the time you indicated. This means that if you don’t get the money within a certain period of time, the site may return the money to the donors. Examples of such websites include Indiegogo, speedups, peerbackers, and EquityNet, among others. The best way to succeed in getting this kind of funding is by coming up with a good story and a great pitch.
Also Read: 13 best business tips to be successful
Consider Taking a Loan
The good thing about bank loans is that they don’t have interest rates as steep as credit cards. However, banks will want to consider your credit rating before lending any money to you. If you don’t have a high credit score, you can increase your chances of getting the loan through looking for a co-signer. This is a person with a good credit history who agrees to be your guarantor in case you fail to repay the loan. Aside from traditional banks, you could look for an online lender but make sure they’re a reputable financial company.
Aside from a bank loan, you could consider getting a business cash advance. This is where you sell your prospective sales to get quick funding. You need to work hard to make sure that the business does well in this case.
Angel investors are wealthy people who fund capital for start-up businesses. Most of the time, they do this in exchange for ownership equity or convertible debt. If you don’t have another alternative way of getting funds for your business, you could look for an angel investor.
An angel investor is a person who has succeeded in business and wants new opportunities to make a profit. Aside from financing your business, angel investors also offer guidance and mentorship. The best thing is that they can use their contacts in that industry to open doors for your small business. Not all angel investors will do this, but most of them are willing to do so.
Examples of angel investors include Tech Coast Angels, Go4Funding, Micro Ventures, and Band of Angels, among others.
Do you have a business idea in mind but don’t know where to get funds? Consider using your savings, borrowing from friends and family members, take a loan or look for angel investors. Your choice of funding depends on the nature of your business. Some may offer smaller amounts of money, while others may only finance big projects. It is important to look for the kind of financing that works for your particular business however as you need to be sure that whatever option you take; you can pay it back without it damaging your business’s prospects.
Also Read: 6 Common Challenges of Every Business Owners
Vivek is an Outreach specialist for Blogs. He is also a writing enthusiast fond of healthy and happy living. He believes Knowledge gets better when shared. So he founded The Mindful Bytes as a platform for people who love to read and write anything that has to do with Health, Tech, Business, Finance, and Lifestyle.