If you are considering starting a small business, then your mind is probably racing with all the things you might need to prepare, organize, and facilitate. One of the main things that needs to be considered is how you are going to finance it. You may have a big idea, but if you don’t have the means to fund it, it could end up being nothing more than a pipe dream. Here are 4 alternative ways to finance a small business start-up.
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Self-funding
Whilst you may be able to borrow money to fund your start-up, you may decide that, in the first instance, you would prefer to use money that you already have saved. Whilst you may have intended the money for another purposes, self-funding means you can pursue your business dreams without any debt. It’s an interest-free alternative that might make the most sense in the long run.
Business loan
A business loan is a great way to fund a start-up business as it allows you to keep any savings you may have as a contingency fund should something unexpected arise. It also allows you to pay back the loan over a set period making it far more financially viable month to month. You may be required to provide a business plan as well as evidence of how you intend to pay back the funds each month. It’s a good idea to go through companies such as Opportunity Business Loans as they work alongside many lenders and may be able to obtain rates you wouldn’t otherwise have access to.
Rewards-based Crowdfunding
Rewards-based crowdfunding is a very popular way to raise money, particularly for start-ups. You pitch an idea on a crowdfunding site together with a targeted amount of money you wish to raise by a specified date. You then rely on people investing in your idea in exchange for rewards. Rewards can vary from free products, discounts, or other perks that may be fitting. It is particularly popular in the likes of the gaming industry whereupon people will invest in new developers and be given access to games as a reward.
Friends and family
Granted this might not be the most ideal way to start a business as there could be an element of apprehension from all sides. You might, however, be surprised at how many people believe in you and are eager to help your idea take off. If you are borrowing from people other than your parents, you might want to have some form of legal agreement set up to make things a bit more business-like. You should also discuss whether some form of interest rate should be applied to the borrowing. Whilst it is not a bank or business loan, formalizing things might alleviate any concerns that they may have and could make you feel better about the whole thing. Another option is to offer them a small percentage of equity with an option for you to buy it back once the loan is fully repaid.
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