Are you planning to launch a business? Starting a business is challenging, to say the least. Right from the research to developing a business plan, it is a complex and time-consuming process. One of the most crucial stages of launching a business is financial planning.
While starting a business doesn’t require a lot of money, you will need an initial investment to cover expenses and purchase assets. There are several sources to finance your business. Let’s take a look.
Utilising your personal savings is one of the most common ways to finance a business. Entrepreneurs tend to resort to their personal finances for a number of reasons. Firstly, they don’t require approval from anyone, so these funds can be employed as desired. Moreover, it’s a cheap source as interest isn’t applicable.
But that being said, personal savings offer a limited amount. It can help you start but won’t sustain for long.
Continuing Day Job
Don’t rush to quit your day job when you decide to start a business. Many entrepreneurs continue their regular jobs, which helps them earn and save for their new venture. And if the business idea falls through, you will have the safety net of a day job.
A conventional business loan is another popular option. While it’s a reliable source of finance, it’s not easy securing a loan. You need to have a solid credit score along with a persuasive business plan to qualify for a bank loan.
Compared to traditional bank loans, it’s much easier to borrow from online lenders. Taking out fast loans is simple and quick. In fact, you can apply for a short-term loan and receive funds within the same day.
As the entire process is online, it gives leeway to fraudsters. Make sure you’re dealing with a reliable lender.
Use A Credit Card
If you want to launch your business immediately and no other financial source is coming through, a credit card can assist you. It’s easy to apply and qualify for a business credit card.
However, it’s best to use a credit card only if you can make payments on time. Even one delayed payment will impact your credit score and thereby, affect your future ability to borrow.
Friends & Family
Not only are bank loans difficult to qualify for, but they also impose a heavy interest rate. On the other hand, it can be much cheaper to borrow from your family and friends. If you’re lucky, they might not even charge you interest.
That being said, you should be careful when borrowing from friends and family as delayed repayments can turn relationships sour.
Often government and private institutions offer grants to upcoming entrepreneurs. Winning a grant can be transformational for your business. Here’s an indepth guide on how to write effective grants proposal for funding. However, carefully read the fine print before applying for grants.
Crowdfunding is an inexpensive way to raise finances for your business. All you have to do is sign up on a crowdfunding website and hope the public believes in your business idea.
Home Equity Loan
Do you own a home? In that case, you can consider a home equity line of credit. This is a low-interest option that can help you start your business. That said, if your business fails, then you would be jeopardising your house.
You can develop a persuasive business plan to get an angel investor on board. In addition to finances, angel investors also bring industry experience to the table. Although, involving an angel investor implies diluted ownership so beware of that.
The Bottom Line
Just like for any other stage of launching a business, it’s important to do your research and avoid rushing the financing stage. It’s pivotal for establishing a successful business.
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Founder Dinis Guarda
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