By Sarah Kearns
Thinking about starting your first business, but don’t know where to get the money for your million-dollar idea? Whether you are thinking of opening up a restaurant or you wish to launch a hip app, you will need to have some starting capital to get you going. Luckily, there are many start-up financing solutions out there that can help you launch your business.
Financing from Personal Funds
There are many entrepreneurs who choose to finance their first business from their personal funds. This form of financing a new business is also known as bootstrapping and usually includes taking money out of your credit cards, accounts, and personal savings. It’s actually one of the best ways to start a new business simply because you don’t have to borrow money from someone else or deal with bank loans.
However, there is a big downside that comes with self-financing and that is running out of funds. This is why it is important to make a good long-term strategic plan for your business and count all the expenses beforehand. In case you wish to earn some extra cash that you will later use to start your new business, there are plenty of options. For example, renting out your own spare parking space might be a good idea.
If you don’t have enough money in your bank account to start your first business, consider crowdsurfing as an option to raise some cash. There are many crowdsurfing websites nowadays and the most popular one is called Kickstarter. It’s basically a crowdfunding platform where you can get money from people who are interested in your business or project.
You will also need to understand the rules of this game. For instance, if there is not enough money raised, the funds go back to the donors. Also, most of these platforms take cuts from the cash that is raised. What you need to know here is that you will need to have a good idea for a business to attract the attention of potential donors. Besides a good story, adding a video and offering perks like sample products and t-shirts seems to help a lot. Keep that in mind if you are planning on using crowdfunding, the idea for your business will become public.
Applying for a micro loan is also a good option when launching a new business. These are basically small loans that are available through micro-loan organizations, community recourses, and lending groups. Most of these organizations cater to entrepreneurs with a low-income and not everyone qualifies for their loans.
The size of the loan, rates, and interest vary from place to place and is negotiated between the lender and you. In order to qualify for the loan, some organizations that borrow money require from borrowers to take a business-training course. This form of financing a new business is attractive to people who either don’t want to take out big loans from banks or have a weak credit score.
Borrowing from Family and Friends
Turning to people who you know best to invest in your first business is a very popular option nowadays. Borrowing funds from your friends and family comes with many advantages. For example, most of them are less likely to ask for high-interest rates and they won’t be interested that much in your credit score like a bank would be. However, there are certain risks when borrowing from family and friends. In case your venture doesn’t pan out or if it takes you much longer than agreed to pay them back the loan, the relationship can become complicated.
Are you ready to launch your first business? Choose the most suitable financing solution for your new business and make your dreams come true in a heartbeat.
Sarah Kearns is a hard working mother of three daughters. She is a Senior Communications Manager for BizDb, an online resource with information about businesses in the UK. She loves cooking, reading history books and writing about green living.