Many of us have had the experience of sitting with a group of friends and doing what we all love to do: complain about work. Having ideas is great but anyone also needs to have realistic ways to fund your business.
Often a conversation about new ventures will veer into dreams and aspirations of being your own boss, having your own business, of having a job that actually reflects your passions and abilities.
Friends will often encourage you with cries of “That’s a great idea! You should do it!” But then, there is always the one practical group member, who can dissipate that beer driven bravado with the quip, “You don’t have the money to start a business.”
As much of a mood killer as your friend may be, he or she is correct.
Starting a business does require an influx of cash, the amount of which varies according to the nature of the endeavour. As more and more individuals develop their entrepreneurial skills, the concept of funding becomes more relevant.
Finding Realistic Ways to Fund Your Business
So when you have had enough of your current employment situation and decide to jump into the foray of business ownership, how exactly do you fund it? The first piece of advice is always to do your research, not only on loans and capital but also on a budget, location, marketing, overhead and other factors that can make or break a start-up.
This research will constitute the foundation of a business plan which you will have to submit to many lenders. It requires you to be realistic about your financial goals and it will help you keep your loan request within reasonable limits. There is no point to ask for more money than you actually need.
Online Lending Sources Can Help
The most traditional means for funding a business is a bank loan, which may seem quite daunting, as Images of stoic bankers in pinstriped suits rejecting your application are rife in the movies.
In reality, there are loans that deal specifically with small businesses and start-ups. These loans offer different terms and conditions, including interest rates and repayment schedules.
It is also a good idea to look for a community or local bank, rather than a national institution with branches in your city. Local banks are more likely to become involved in community projects, including supporting and fostering small businesses in the neighbourhood.
If local sources are not available, there are online lenders, which may sound dodgy, but in this virtual day and age, there are many legitimate and sound businesses online.
Small business loans are available online and do offer a viable alternative to brick and mortar banks. If you want to learn more about what lender ALC Commercial can offer your small business, just click this link.
Super Small Lending Options and Angels
Another possible source of capital is the microloan.
As the name suggests, a microloan is a small loan given to businesses that might not qualify for a conventional bank loan. There are organizations, non-profits and private companies that specialize in microloans, helping businesses in need. It literally might pay for you to consider them.
Believe it or not, there is a category of funding called Angel Investors. They may seem like heavenly beings to you, as they often invest in start-ups or entrepreneurs in exchange for equity within the company.
Some angel investors will be motivated by a genuine interest in helping new businesses, while others might be solely profit-oriented. Regardless, they will expect a detailed business plan (aren’t you glad that you did that earlier?) and in addition to the funds, they can offer valuable business advice and experience that will help your start-up.
Start Talking to Your Local Community
There are alternative private investors, usually friends and family. While we are all familiar with the saying that you shouldn’t borrow money from friends or family, they do provide a potential funding source.
Should you decide to pursue that route, make sure all agreements are understood and papers are signed to avoid any future misunderstanding. Be absolutely clear if the contribution is a loan or a stake in the company, and proceed from there.
An innovative means to start a business is crowdfunding. The joys of the internet just became brighter!
Many crowdfunding sites have helped to launch a start-up. Crowdfunding can be a great way to fund your business. Individuals contribute varying amounts, usually small, to a project they support.
Of course, we have seen how these campaigns can go quickly awry, so should you consider this option, carefully read the rules of the site and know that the site charges fees. You will have to handle your own promotion, and in exchange for the donors’ support, be prepared to offer them gifts or items of modest value.
Using your own money, including savings accounts and credit cards, are possibilities as well, although only you can determine if you are willing to make such a financial investment. Cashing out retirement savings involves taxes and credit cards carry high-interest rates.
Put Together a Plan and See Where it Goes
If you are serious about starting your own business, then saving money now is a good plan.
There are certain accounts that will allow you to accrue interest at higher rates without withdrawal penalties. You could also start small, trying to gauge customer feedback to your product or business. In this manner, you can still work full or part-time while perusing the parameters of your business dream.
Armed with all of this information, you now know that business ownership is possible, even if a bit demanding. Therefore, the next time your pragmatic friend wants to be a buzzkill, you can inform them that yes, you do have the money, and cheers to that!