If you ask any of your friends, they will all tell you that they plan on starting their own business one day.
The fact is that over 500,000 businesses are started each month. Even if they are created across different industries, they all have a thing in common. Every business needs a form of initial investment to get the company off the ground and fund the initial expenses.
If you are someone who is ready to transform your idea into a business, but you lack the funds, here are some guidelines that will help you figure out what options you have.
Read on to learn about some common ways to get your business financed.
Angel investors can be small groups of people or private individuals who decide to offer funds to start-up companies, by making an equity purchase. If you need more than funds, then angel investors are exactly what you are looking for, because they can also help you with their guidance and expertise. But, not all businesses can benefit from the support of an angel investor, because they help only the companies that have growth potential and a viable business plan. Also, they require for you to have a reasonable exit strategy.
Family and Friends
Many start-up owners ask the help of their friends and family members. They become investors who make an equity investment, or they can offer you a business loan. But you have to know that there are some drawbacks to financing your business this way. If your business isn’t successful, it can ruin your relationship with your closest circle of family and friends, and impact your personal life. Additionally, if they want to become business partners, it might be hard to turn them down while they have their personal money is at stake.
A business loan is a traditional financing solution that a lot of new businesses use. Contact a lender and they can check and if you qualify for getting a loan in 5 minutes or less. The lender’ss main benefit is that you pay the sum together with an interest. If you are interested in getting a loan, before you speak with a lender, we recommend using a business calculator to get a clear view of what it will cost you. If you decide to go this route, when you speak with a lender, have your business plan ready. One of the things they’ll want to review with you is how you plan on generating cash to pay them back.
The easiest way to finance a business is to use your savings. If you are living an ideal life, then you will be able to save the amount of money you need, and you can use the funds to start your own business. This is the smartest and safest solution, you can choose. The problem with this financing solution is that you will be limited to a certain amount, because not everyone has large sums of money they can portion towards their business. Some entrepreneurs prefer to use their insurance policies, retirement plans or their houses as equities, but it is a dangerous method, because if your business goes wrong, you can lose everything.
A good idea is to save a part of the funds you need for starting your business, and choose one of the other methods to get the extra funds.