Having an idea for a new business and then turning that idea into reality is exciting, and something which should be admired; it’s not an easy task. One of the stumbling blocks that people find is the money required to start the business. Establishing a good financial base is crucial. Otherwise, you might run out of money too early and be unable to continue, no matter how successful you would have been. When it comes to financing your new business, there are a number of ways to go about it. Here are some of them for you to consider.
Know How Much You Need
Whichever route you choose to do down to secure your seed capital, you’ll need to know how much you want to borrow. Without the figures in front of you, you might borrow too much, which could be hard to pay back because you’re not making enough to cover the repayments, or too little, which would mean having to either go back and borrow more or give up entirely when the cash runs out. Writing a business plan has many benefits, but it is vital to the success of any campaign to borrow money, whether that be from a bank or other lending source. A business plan will tell you how much you are going to need because it allows you to set out all your outgoings in one place. It will also allow you to think ahead to which times of the year will be your busiest; you might be able to arrange repayments to be larger or smaller depending on the season. You should get an accurate picture after making your business plan.
Do Your Research
Before you apply to borrow any money, take a look at which options are available to you. Once you know your options, you can work out which one will be best for you. It will depend on how much you want to borrow and what your projected business turnover is as to where you look first, but make sure you exhaust all options so that you’re definitely getting the best deal. In the meantime, you might choose to have an overdraft in your bank account or use a credit card to fund smaller purchases.
Bank Loans
A loan is most people’s first consideration when starting up a small business. Borrowing the money from a bank or private lending source and then paying it back with interest is something that everyone understands, and since the concept is easy to grasp, it is also easy to work with. There are a variety of places from which to get a loan. The first and most obvious is your bank. You can discuss your requirements (this is where you will need your business plan)and they will determine if lending you the money is a sound investment. They will also be able to set an interest rate, so you may be paying back more than you originally thought you would.
Personal Loans
If your bank is not confident enough to lend you money for your business because they are not convinced that your business plan is accurate, for example, then another option is to get a personal loan and use that to fund the business. If you have bad credit, this can potentially be a problem, but some companies such as Bonsai Finance will be pleased to lend money with no credit check as long as you meet the other criteria. The company would then owe you money so remember to ensure that it pays you back when there is money to do so.
Trade Equity
Trade equity means bartering what you have in order to get something you need. So you might manage to obtain some free warehousing space in return for agreeing to provide computer support for the company that owns the warehouse. There are many different options; the key is not being afraid to ask. The worst that can happen is that the other company will say no. The best is that you get what you want. So you have to try.
Get An Advance
If you have a big customer lined up, someone who is ready and willing to place an order just as soon as you are running, why not ask them for an advance? It will mean you have some seed capital and can get started sooner which in turn means that they get their goods and services sooner. They’ll have to pay anyway, so paying in advance or at least a good-sized deposit could help enormously. You may have to offer something in return such as a slight discount or an assurance that you will provide the goods within a certain timeframe, but as a startup that should be entirely possible.
Find An Investor
If the usual borrowing route doesn’t appeal or isn’t open to you, you should tryfinding a private investor.There are websites that specialize in this, allowing you to input your details which are then sent out to a variety of different potential investors. It is known as peer to peer lending and is a great alternative to the standard way of borrowing and repaying themoney. As well as peer to peer lenders,there are professional investors who are keen to be involved in new companies. However, these investors may have a much stricter set of lending criteria so it may be more difficult to obtain money from them.
Crowdfunding
Crowdfunding is becoming more and more popular. Crowdfunding is yet another way to gain funds for your business, but it doesn’t necessarily require you to pay the money back. You can go online and find the right crowdfunding site for your requirements. There are many, and some are ideal for artistic endeavors, others are just right for IT companies, more are all about education and so on. Create an unmissable campaign and work out what you will offer people in return for their investment. It could be a product that you sell or a special mention on your website. Perhaps it would be money off for life. If the lure is good enough, then you will find plenty of investors ready to help.
