Each year, over 627,000 businesses open their doors for the first time. No matter what industry they’re in, they all have one thing in common: they financed their company.
But building capital for startups isn’t as simple as it might seem. It takes time, patience, and determination. But as long as you have the right resources at hand, you’ll be able to find the funding you need.
If you’re wondering how to finance a business in the first place, you’re not alone. Here are a few simple things to try.
1. Use Your Savings
Financing your business doesn’t have to mean taking out loans. In fact, the best place to start is often with your personal savings.
Remember, even a few hundred dollars can give you the funding you need to get things off the ground. It all comes down to the type of business you’re starting.
If your personal savings aren’t enough to give you the capital you need, use them in addition to other methods. This can give you access to more money while also helping you keep your credit score as high as possible.
2. Utilize Personal Credit Cards
If you don’t have savings but do have a decent credit score, you can always use your personal credit cards to get your business up and running.
Try to make charges in a controlled manner and pay them off as soon as you can. Otherwise, you risk paying hundreds in interest each month. Worse, you could end up lowering your personal credit score.
If this happens, you could find it harder to take out loans or even qualify for a new apartment or mortgage.
3. Take Out Personal Loans
If the thought of using credit cards isn’t appealing, you can always take out personal loans. Loans often have lower interest rates than the standard credit card. And considering that the average credit card interest rate is 19.24 percent, this could save you thousands over the life of your loan.
Approach your bank or look online for personal loan providers that can help you get the money you need. Just remember not to take out a loan that you can’t afford to repay.
4. Bootstrap Your Business
With some businesses, it’s possible to finance their growth on the go. People refer to this process as “bootstrapping.” As you bring in profits, you can invest some of that money towards growing the business.
The process takes longer than other financing options. But you’ll have the peace of mind knowing that you didn’t take on extra debt.
Think about the types of services you’ll offer. If you don’t need upfront capital to provide those services, get started immediately. Use the money you make to pay yourself first and then use what’s left to grow your company.
5. Find Investors
Every successful business needs a solid business plan in place. Think of it as your outline for the growth of your company. This plan helps you stay on track, but it can also get used to win over investors.
Look for companies or a brokerage company that you think might have an interest in supporting your company. Then, make your pitch.
During the pitch process, explain how your company will be successful and show off your business plan to build their confidence.
The more lucrative and developed your business seems, the better luck you’ll have in getting investors.
6. Go Into Business with a Partner
You don’t always have to start a business on your own. In fact, doing so can be more costly and more time-consuming. If you’re not determined to be the sole founder of your business, consider working with a partner.
By taking on a business partner, you can leverage both of your savings, credit scores, and knowledge to further improve your company’s capital. When you have someone else to lean on, the full burden of your business finances won’t be yours to handle alone.
7. Ask Your Family and Friends
Think about the people closest to you. Have they expressed an interest in your up and coming business? If so, consider asking them to help you fund your new venture.
They can contribute as much as they feel comfortable with—any amount helps. But if they’re looking for more of an investment, they can even loan you the money.
You can negotiate a lower interest rate than you might qualify for with a bank. Or you may find that some of your loved ones are willing to loan you the money without interest.
Either way, it never hurts to ask. The worst thing they can do is tell you “no.”
8. Consider Crowdfunding
Even if your loved ones aren’t willing to loan you money, you can always turn to the general public. Crowdfunding is the best way to get your prospective customers to back your business.
These campaigns happen almost exclusively online and they’re incredibly affordable. Most sites charge a small service charge, so make sure you’re comfortable with the details before you launch your campaign.
You’ll also see better success if you offer backers certain products. Things like stickers with your logo or discounts on your products and services can go a long way towards encouraging backers to donate.
9. Go to Your Bank
Your bank can be an incredible resource when you’re starting a business. Not only will they help you open a business checking account, but they can also help you finance your new company.
Speak with their loan department about their business loan options. If you’re an existing customer with a good credit history, you may end up qualifying for a business loan.
Even if you don’t, their loan specialists can help you explore your personal loan options and fund your business that way.
Final Thoughts on How to Finance a Business
If you’re tired of wondering how to finance a business, these ideas should give you a good place to start. No matter which options you choose, take the time to build a solid business plan and make sure your ideas are viable. If others express interest in your business, even during the planning stages, you’ll set yourself up for success.
Looking for more tips to help you develop and grow your company? Check out our latest posts.