7 Ways to Finance Your New Business Venture
03 April, 2019
Financing a new business venture can be challenging even if the economic climate is healthy. Even if you find the perfect deal, you might have to give up control of your business or use some of your personal assets as collateral. There’s also the process of applying for a loan, which can sometimes be very painful. You might have funds of your own you can draw on but it’s not always an option, so what other ways are there to finance your new business? Here are 7 ways you can try.
- Bank Loan
This is the traditional approach and the one that many business owners think of to start with. If you’ve got assets, you are up straight with your taxes and your credit score is good then you stand a good chance of your application being approved. If your credit score is looking a little ropey and you’re not sure why you should look at it closely. You might need to dispute it in which case you need to read How to Dispute Your Equifax Credit Report in 2019 (Proven Tips). Bank loans are the most commonly used source of funding, and it pays to shop around. Each offers different advantages, and you’ll have no problem finding a bank to suit your needs.
- Credit Cards
The approval process for getting a credit card is fairly quick. Minimum payments tend to be very low which makes them a good option if you need money quickly and you’ve not got much money coming in. On the other hand, they are risky if you fall behind on your payments. Your credit score will be damaged, and you could have the debt hanging over you for years.
There are several different crowdfunding sites you can use, and they can be a fun way to raise money for your business at a low cost. The site generally takes a cut of any money raised, and you need to read the small print to check what happens if you don’t reach your goal.
- Family and Friends
One of the most common ways to raise money is to ask family and friends. Only approach them when you’ve got a business plan in place and make sure you advise them of any risks. The best part about this type of financing is that there’s often no interest to pay or the rate will be very low.
- Attract an Angel Investor
Angel investor is a term that’s been used for a while now although nowadays it has a slightly different meaning. An angel investor is a person who is willing to invest in promising early stage businesses. They tend to be serial entrepreneurs who have already achieved considerable success with their own ventures and are looking to fund others. If you do some research, you’ll be surprised what ideas you come up with. Tap into your network of related businesses and ask around. List your business on start-up directories and you may come across companies in the same field that have received funding from an angel investor. There are also pitching events where entrepreneurs come together with business ideas. The idea is to give a short presentation of a business plan. The audience is usually a group of angel investors. It’s important to realize that these people aren’t giving their money away for nothing. In exchange for risking their money you might have to give them a seat on the board of directors thereby giving them a say in the company’s management practices.
As the name suggests, a microloan is usually for a small amount of between $500 and $35,000. The upside with a microloan is that much less documentation is required, compared to a bank. Microlenders are non-profit organizations that work differently than banks. There are several hundred microlenders across the US, and their interest rates are just a little more than banks.
- Keep Your Day Job
It’s common practice for startup business owners to keep their day job until their new business has got off the ground. It’s easy to do this when there are virtual assistants to help with the workload. Use some of your salary and invest it in your business. A part-time job or side gigs are also great ways to make some extra money.
In the modern world of business, to make money, you have to spend money. When you’re looking for financing the options above are a good place to start.