One of the biggest challenges facing anyone who wants to start a new business is how to obtain the funds needed to get their venture up and running. There are many options available.
Self-Funding
Also known as bootstrapping, this is a popular choice. There are several ways to self-fund. You can choose to tap into your personal savings, take out a 2nd mortgage or utilize the balance on your credit cards. Some find that taking on an extra job is a viable alternative to generate the money needed. While still others dip into their retirement funds for much-needed cash.
Finding ways to reduce monthly expenses is important in order to free up extra cash to fund your business venture. Many new business owners are paying off student loans that need to be addressed before they can put money into their company. Consider a loan consolidation for your student loans.
Then you only have a single student loan payment to remember. If you’re thinking about consolidating your student loan debt but aren’t sure what it entails, there is a guide to help you understand your options and figure out the best choice for you. Other ways to free up cash could be cutting the cable cord or avoiding eating out as often. Be sure and cancel any unused subscriptions, streaming services, or memberships that you no longer need.
Borrowing from Family and Friends
This is another option that can be successful, however, if you decide to borrow from those close to you, make sure you have a solid plan in place. Put it in writing to avoid any misunderstandings. Everyone must agree on the amount borrowed, how much interest will be charged, and what type of repayment plan will be put in place.
Find Outside Investors
Angel investors are those who invest in a new or small business venture, providing capital for startup or expansion. They are usually wealthy individuals who have spare cash available and are looking for a higher rate of return than would be given by more traditional investments.
They are more likely to invest in businesses that are just starting out, choosing businesses that they are interested in and see as having potential, even if the company has not proven itself yet. Angel investors often fill in the gap between financing provided by family and friends and venture capitalists.
Try a Government Grant
A small business grant is funding from the government or an organization that is given in order to help small companies succeed in building and growing their business. Unlike loans, you don’t have to pay this money back. You do not have to put up collateral, pay fees, or interest. The best part about grants is that the money is yours to keep, and you’ll never have to pay it back after using it for your startup.
Grants may often come with rules on how the money can be spent. Grants can sometimes be hard to come by and if do receive a small business startup grant, it’s imperative that you follow the funder’s guidelines and spend the money only on what the grant covers and nothing else.
Interesting related article: “What is a Startup?“