Whatever kind of business you happen to run, it’s important to make sure that you are able to properly fund it. Without the right funding, you are never going to get it off the ground in any reasonable way, so that’s something that you are going to need to think about. But with so many potential funding opportunities out there, it can seem like a minefield. In this post, we are going to take a look at some of the best ways to fund a business. Being aware of these options can help you to make the right decision for your company.
First: Determine Your Needs
Before you actually look into what kind of funding you might want to make use of, you need to make sure you are aware of how much you actually need. It can be challenging to properly determine your needs, but if you fail on this front you are much less likely to get the funds you need, and the future of your business is going to be much less certain on the whole.
In doing this, consider your main overheads that you are going to have upfront, but also any ongoing costs that might crop up. If you are struggling to work all this out accurately, you might want to look at examples of other business plans. Hiring an accountant can also be effective.
One of the major types of funding that many businesses use is the loan. This is the more traditional way of funding a business, but it is still one that a lot of companies get a lot of use out of. One of the main advantages of taking out a loan is that you can usually get exactly the amount you need, without having to wait for the right investor to come along. You will, of course, need to repay it, and you’ll always want to keep an eye on that interest rate as you compare loans.
There are actually a few major types of business loan you might consider. First of all, you have the SBA route, or small business administration loans, which are one of the first places that most entrepreneurs look when they are seeking out funding. Then you have the traditional bank loan. These days, it’s much less going into the branch and speaking to a manager, and more filling out forms online, but it’s a pretty good bet for many businesses to gain money this way.
One of the better options if you are looking at taking out a loan, however, is to take a look specifically at small business loans. These are often best for starting out with, as you don’t need to over-commit on how much you are borrowing just to get a loan. For that reason, they are a great option for many business ventures, even if you are planning to grow your business into a large one later on in its lifespan.
As you can see, there are many kinds of business loans available, and this is easily one of the best options when it comes to funding your new business.
While loans can be useful in helping to get a business on its feet, you should also consider taking a look at the world of grants. The difference between grants and loans is that grants are generally non-repayable, which is obviously a major selling point for them. However, you are unlikely to get as much money, and you might not be able to entirely fund a business this way. The fact that they are non-repayable also means that they are often extremely competitive, and you’ll be vying with other businesses for each grant you apply to.
Whenever you are looking at grants as a potential funding source, remember that you always need to check the eligibility criteria first, so as to avoid wasting your time applying for grants you are not allowed. Then it’s just about working out how to put together a good application. Many businesses even hire grant writers to do just this for them, and it is not a bad idea to have a grant writer on retainer if you are really keen to get funding.
As well as offering seed capital for your venture, grants are often able to be accessed further on in the timeline of your business’ growth, so they are something that you should always be on the lookout for.
There is a lot of controversy over crowdfunding and whether it is actually all that effective. But anyone who has ever tried to use it will at least be able to tell you that it does tend to get the necessary funds coming in, even if it can take a while to do it. Crowdfunding obviously relies upon lots of people donating money, so you are going to need to make use of your digital marketing and word of mouth skills here. You will also find that certain businesses lend themselves particularly well to crowdfunding success – such as non-profits and businesses offering brand new and exciting services.
A big part of finding success with crowdfunding is in what you offer people who donate money. You will generally have a sliding scale of benefits that people receive when they donate to the pot, so you need to make sure these are attractive enough to get a lot of people on board. As long as you do that, and you make good use of social media and other tools to spread the word, you should be able to fund your business this way fairly easily. It can at least work as a partial fulfilment for however much money you ultimately need for your business to succeed, so it’s not a means you should overlook in any case.
There are a lot of websites out there dedicated to crowdfunding, so you can use more than one or put all of your efforts into one. But the important thing is to persist, and market it well.
There has been a lot of talk about peer-to-peer lending in recent years, and part of the reason for that is that it is just such a powerful tool. However, you do need to already have the necessary peers in place in order to make this work, so if you are starting out completely fresh in an industry or a marketplace, you might struggle here. That being said, if you do have the peers, this can be a hugely effective means of funding your business.
With peer-to-peer lending, you are simply asking for the help of your peers to provide upfront cash in exchange for either repayment with interest, or a stake in the company, or a little of both. With this, it’s just as important to find someone with the right attitude and a real belief in your company as it is to find someone with the necessary funds. Both are going to be a vital part of the process.
All being well, you should be able to get your business up and running with the help of some friends. The only thing you need to remember then is to return the favour in the future.
Another of the more traditional means of funding a business is to use what is known as an angel investor. It’s a strange name, but it just means that you manage to find someone who is happy to stump up the capital to entirely or almost entirely get your business up and running. Hence, they are like an angel saving your skin. As you might imagine, it can be a challenge finding someone to be an angel investor for your business, but that is not to say that it’s impossible.
In fact, these days you can find online services which help you with getting angel investors, and all you need to do is learn how to write an amazing pitch for your business. It’s worth looking up what goes into a great business pitch before you seek out an angel investor, whether you are doing so through one of these websites or just by asking around amongst people you know. If you don’t grab their attention and impress them straight away, you are going to struggle to get them on board. Be prepared to try out a number of different investors before one of them says yes.
At the end of the day, you are probably going to do whatever you need to in order to fund your business. The word for simply using a variety of means to achieve this end is what is known as bootstrapping, and it’s something that a lot of business owners still need to do. You might seek out the help of friends and family, use some credit, or take a look at your savings accounts. Whatever it takes to get the funding you need.
As you can see, there are many things you can do to fund your business. Just make sure you choose the right one for you.