Starting a business is exciting, even during uncertain times. But no matter what industry you’re planning to enter into, you’ll need money to make it happen. There are dozens of ways to finance a new business, but some of them are better than others. Here are five proven and easy ways to get your business off the ground.
1. Start with Your Personal Savings
The best way to start your business is to use your personal savings. This is money that you already have on hand and won’t have to borrow from anyone.
If you use your savings, try to leave at least some of that money untouched. This can help cover unexpected costs that might pop up in your personal life. Remember, you still have your regular monthly expenses to cover on top of your new business’s operations.
The more you can rely on your savings, the less money you’ll have to borrow from a lender. Ultimately, this will save you money in the long-run and helps preserve your personal credit score.
2. Talk to Your Family and Friends
If you’re passionate about your new business idea, you’ve likely shared it with your family. Consider asking them to help you get things started by offering you a low-interest loan.
When you borrow from friends and family, you won’t have to deal with the bureaucratic processes that you’d deal with when borrowing from a bank or other lender. They’ll be able to give you the money and you’ll be able to repay them according to the terms you set in your personal agreement.
Just remember not to push things. If a friend or relative doesn’t have the money or isn’t willing to back your project, move on. Never let their inability to fund your business come between your relationship.
3. Apply for Small Business Loans
If you’re starting a small business, you’ll likely be eligible for a small business loan backed by the Small Business Administration. These loans are designed to help borrowers with limited funds bring their visions to life.
The loans themselves have lower interest rates and don’t require a strong business credit score to qualify for them. Instead, they leverage your personal credit score to help you get a loan that you can afford.
If your credit score isn’t stellar, contact a professional. You’ll need someone to help fix credit problems before you can apply for a loan. The higher your personal credit score is, the easier it will be for you to get a business loan.
Once you apply, make sure you understand the loan terms in detail before you accept the money and only borrow what you need for your business. Borrowing too much will increase your debt and could put strain on your monthly budget for years to come.
4. Partner with Investors
If you don’t want to use a loan to finance your business, you may need to look for investors who can give you the money you need. Investors often loan money to startups in exchange for a stake in the company.
As you grow, they make money off of the amount of profit you make each year. They’ll receive a set percentage of your profits until you either buy out their stake in the company or renegotiate the investment terms.
5. Try Crowdsourcing Your Business
If you don’t want to sacrifice ownership of your company or want to sell less of your company to investors, you can supplement their investment with crowdsourcing. Crowdsourcing allows you to gain support from people all across the world through online campaigns.
If people like what your company stands for and what you’re trying to accomplish, they can give you money online. Often, companies offer small rewards in exchange for crowdsourced support. These can be small things like stickers, discounts on products, or early access to new items as you develop them.
Keep in mind that it’s rare to be able to finance an entire business with crowdsourcing alone. You’ll still need to leverage your other financing options to get enough money.
Financing a business can be challenging, but these tried and true methods will help you get the money you need quickly.