According to the United States Small Business Administration (SBA), in 2010, there are 27.9 million small businesses in the US, and of course, they keep growing day-by-day. Finding the money to start up these business ideas in the minds of many is often one of the first and major problems that entrepreneurs face. This step can be very difficult and frustrating, especially when your expectations are not met or looking for funds in the wrong places. Therefore, I will uncover five proven ways to fund your new business.
This way has been proven as a relatively easy way to fund a startup business; however, it comes with a really big risk. You are left hanging if the investment does not pan out. Notwithstanding, this is an attractive option, and it has various paths you can go about it. You can make use of your savings (savings from checking account, family inheritance, or funds lying fallow in an account), use credit cards, selling off personal assets (such as real estate, bonds, stocks, valuable possessions), using other income to fuel your business (like renting a room in your house, sharing your car, being a delivery driver, and so on; although this may not spontaneously fund your business, the income can add up as soon as possible). Self-financing requires determination and sacrifice and also shows your commitment to the business. This commitment is an avenue for winning additional funding from potential investors.
Family and Friends
Another proven way to fund your business is by asking family and friends for investment. Often, the people in your life believe in you and will put their money in someone they trust it with. Besides, they are less likely to demand strict repayment terms or high-interest rates. However, loans from family and friends come with their risks. Your relationships may have to suffer if anything goes wrong. Moreover, you must have an attorney draft a formal agreement for family and friends' loans and treat your investors professionally, separating personal relationships from the business. Platforms like Zirtue can be of food help.
Funds from customers and suppliers
Have you heard of pre-selling, prepaying for orders, or receiving an advance? These funds are what are used to take care of the transactions. This funding may not be an easy one to come by, but it is worth the while. If your goods or services are unique, or your customers are in dire need of it, they get to prepay before they get the goods. Also, you can get funds for your startup through credit from suppliers. An agreement is made on what, when, and how to go about it, and the goods are released to your company.
Small Business Administration (SBA) loans
This method is one great source of funding for your small business. Often, small business owners in the United States searching for loans have SBA as one of the first places for them to look into. The Small Business Administration has a uniquely designed program that offers microloans to owners of small businesses. The microloans can be up to $50,000 as it varies from state to state and is much easier to get than conventional financing. Also, they come bundled with business training, which can be very useful for first-time entrepreneurs. Although applying for the SBA loan can be very intimidating, the chamber of Commerce has an in-depth guide leading you through the entire process.
Use of Crowdfunding Sites
This method allows for a wider pool of small investors with fewer restrictions. It is ideal in the early stages of a business, especially if you don't qualify for a bank loan, don't have the friends or family willing or capable of providing you the needed funds for your business. On these crowdfunding sites, you are required to set up a page for your business and create promotional materials to accept financial support from anyone who visits the website. Some ways to showcase your business on these sites are good images of what you do using Unsplash, pexels, logocreator.io for a free logo design resource, and likes. Popular crowdfunding sites are Indiegogo and Kickstarter
Putting together funds for your new business requires critical planning, effort, and a whole lot of endurance. As a diligent entrepreneur, you need to weigh the various options available to fund your business, comparing the benefits and downsides. You must work hard to overcome potential rejection if you want to succeed.