Whatever your business idea may be, you need capital to launch a new business. Unfortunately, this may be the one hiccup that prevents entrepreneurs from getting their business concept off the ground or causing the company to fail because of a lack of funding.
There are several ways to fund your new venture, but your first step should be to figure out how much you need. Once you have that figure, consider the following funding methods.
Bootstrap the Business
Bootstrapping or self-funding means using your own money as capital for the business. If you don’t already have money saved, saving enough funds may require time and planning. Using your own money when you start is a good option because there is no red tape or compliance rules that you must follow. It also shows potential investors that you are serious and committed to the business’s success since you’re investing your own money.
Look for a Business Partner
If you don’t mind giving up part equity in the business, consider bringing on a business partner who will invest capital in the company. Besides providing funding, a partner may also be able to help grow the business if they have industry knowledge and experience.
You must decide if you want your partner to be involved in the operations and decision-making of the business or if you’d prefer them to be a silent partner who gets paid dividends when the company is profitable.
Launch a Crowdfunding Campaign
Crowdfunding has become a popular way to fund a new venture. Successful crowdfunding campaigns tell a story about the business or product that resonates with potential investors. There are several crowdfunding platforms that you can use to create your campaign. Once created, you can share the campaign on social media to reach a wider audience.
Crowdfunding works by getting lots of people to invest small amounts instead of looking for one big investor. Another advantage of crowdfunding is that it doubles as a marketing platform, showcasing your business to potential customers.
Angel Investor
An Angel Investor is typically a wealthy individual with a fantastic business track record and who is keen to invest in a new business. If you are okay with giving up some equity in your business, an angel investor may be an option.
Apart from investing capital in your business, an angel investor may also provide expert advice to help grow the business.
Explore Loan Options
As an entrepreneur, you may use a personal loan to fund your start-up. When it comes to taking a loan, you must do your homework, as there are other costs like interest and fees associated with taking a loan. Loans also have to be paid within a stipulated time frame, so you must be confident you can repay it on time.
If you’ve taken several loans to fund your business, it may be a good idea to investigate debt consolidation options to manage them.
Small Business Grants
The government or organizations typically offer grants, but unlike other funding options, you don’t have to relinquish equity in your business or repay the money. Since grants are essentially ‘free money,’ they aren’t as easily accessible. There are typically strict requirements that you have to meet to qualify for a grant, and they are usually awarded for the following reasons:
To develop a new industry
To uplift entrepreneurs from minority communities
To promote women in business
To encourage research and innovation
Pre-Sell Products
Another smart option is to pre-sell your products before you launch the business. Pre-selling helps you raise capital and gives you a good indication of consumer demand for your product.
You can pre-sell successfully by marketing your products and company on social media. You must communicate with your customers when they can expect their product. This is vital as the last thing you need is angry customers before the company is even launched.
Sell Assets
You may not have cash, but your money is likely tied up in assets or things you don’t need. Consider selling valuables to liquidate your assets and pump them into the business. Items you can sell include your car, jewellery, and art, or you can cash an investment.
Use Your Line of Credit
Businesses typically incur ongoing expenses, so using your existing credit card or line of credit can be helpful to fund business expenses. An existing line of credit is a good option since you won’t need to apply for a loan, and because it’s revolving credit, you will always have access to funds provided you repay what you spent.
Approach Friends and Family
If you have a wealthy friend or relative, approach them to invest in your business or for a loan. When approaching friends or family, you must share your business plan with them so that they have a clear idea of what your business is. Before getting family or friends involved, you must be sure that you can uphold your end of the deal because failure to do so could ruin your business relationship.
Final Remarks
Having enough capital is essential to get your new business venture up and running, as there are many costs involved in opening and running a start-up. When it comes to funding, there are several options, so it’s worth exploring your options to narrow down on the one that fits your company’s needs.
