Many people look forward to the day when they can finally quit their job and start their own business. It doesn’t even matter if they start small; as long as they can pursue their dream of being an entrepreneur, they are happy to begin at the lowest rung.
Unfortunately, this is a goal that many cannot achieve because they lack sufficient funds and access to essential business-related services, such as cash management solutions.
Financing Your Dream Business
If you are ready to push through with your dream of opening your startup, but are still in need of additional capital , here are some ways you can get the funds you need:
1. Credit cards
Personal and business credit cards can be cost-effective ways of financing your startup. This is because a lot of cards today come with 0% APR (annual percentage rate) introductory periods. Banks and other providers also offer valuable cashback or rewards programs.
In general, credit cards are not ideal for funding large capital investments, but they can be an essential tool for cash flow management. They can be handy if you need to cover certain expenses while waiting for payments or income to start flowing in.
2. Apply for a loan
You can also approach a bank or lending institution to apply for a loan. Most loans come with lower interest rates compared to credit cards, currently between 6% and 13% or even lower, depending on your credit history.
Unfortunately, a loan can sometimes be challenging to obtain if you do not have any acceptable collateral, such as real estate property or paid-off vehicle. However, you can still have a higher chance of getting a loan by finding a co-signer — someone with good credit who agrees to be responsible for the debt if you default. This is an option that can also help you out if your credit score isn’t high.
Crowdfunding is now one of the most popular ways of getting financing for a new business. With this option, your funds will come from small amounts of money from a large number of people.
This is financing solution is mostly done through crowdfunding websites such as Kickstarter and GoFundMe. To get the attention – and cash – of individual donors, you need to have a great, engaging story to go with your pitch. Also, be prepared to promise donors something in exchange for their money, such as a sample product or starter kit. Lastly, you need to demonstrate your own personal commitment to the startup in your pitch.
4. Look for an angel investor
There are some wealthy individuals who like to invest in startup ventures, usually in exchange for an equity stake in the new business.
They are known as angel investors. Most of the time, angel investors not only offer additional financing, but some are also open to providing advice and guidance based on their own experiences.
You will, however, have your work cut out for you when looking for an angel investor. They tend to keep a low profile and can only be identified by asking other business owners or financial advisors.
Some of these investors, though, are active in certain networks so that potential entrepreneurs can get in touch with them. These sites include New York Angel and Angel List.
5. Borrow from family and friends
Lastly, to get your startup off the ground, you don’t have to look far; you can seek help from your own family and friends. Family members, relatives, and friends who have some extra cash can be easier to persuade than people you don’t know. As long as you have a good relationship with them, they won’t have to look at your credit score before agreeing to a loan or demand harsh repayment terms or high-interest rates.
Borrowing money from your family members and friends though come with some caveats. Specifically, if you can’t repay the loan immediately, your relationship with them may suffer.
As such, no matter how close you are to your brother, sister, or friend, if you borrow from them, make sure that you have all the terms of the loans clearly written out. These should include the amount you will borrow, the interest, and the timetable for repayment. Make sure all of these are clearly stated on paper, and that both you and the lender should sign it when everything is acceptable.
The best providers of commercial finance services can also offer other solutions that may be more to your liking and suitable to your needs. But whichever option you are interested in, make sure you know exactly what your responsibilities are so that you can avoid a lot of problems and focus more on building your startup.