Financing for New Small Businesses
Starting a business is not the easiest thing in the world, and financing proves to be the largest of headaches for a new business owner. Though many questions swarm through a new business owner’s mind, such as how to compete in the new marketplace and how to go about finding and receiving the necessary start up funds, successfully starting one’s own business is definitely accomplishable. The following are a few tips to help set your business on the right track to success.
Have a Plan. The first thing you will need is a written out business plan. The plan needs to include your goals, both short and long term ones, as well as the specific steps you will take in order to achieve them. Vendors, investors, and distributors will all need to view this plan, so make sure to include specific, thoroughly-calculated financial projections. Since the financial aspects will need to include all possible revenue streams and the cost structure of your company, it may prove helpful to enlist the help of a professional financier when determining your projections.
Use Government Aid. Even the government understands how frustrating and challenging the financing process is for new private business owners. As such, a variety of government programs are currently available to help you access grants and loans. Take some time to research what types of incentive programs your business may qualify for, and as well any support programs that are designed to assist startup businesses in your industry.
Pre-Sale of Products or Services. Business owners often forget about the possibility of selling their own products in an effort to raise money. The pre-sale of items not only brings in the required money, but it also helps circulate website traffic ahead of time and secure social media followers.
Sale of Assets. This principle may not apply to all business owners, but for some, you may be unknowingly holding the key to funding your business. Regardless of the specificity of the asset – an antique car, a jewelry collection, passed-down family land, etc. – it is up to you to determine whether the sale of the item is worth the startup of your business.
Credit Cards. Business credit cards are among the easiest and most available ways to fund your new business. The funding is quick, and the minimum payments on the cards are generally very low. However, keep in mind that this type of financing does not go away. Though paying a minimum amount may work for some time, if trouble should arise, interest rates and card costs can escalate quickly. Credit cards may be quick and efficient, but they must be handled with extreme care.
Angel Investors. Google, Yahoo, and Costco were all started with the aid of angel investors. The investors normally expect a 20 to 25% return on their investments, but the entire process is usually much friendlier than other kinds of investments. Close to a mentorship, even, as most angel investors are experienced financiers who will be willing to provide tactical tips and might even pair you up with some of their other customers or partners who may have a use for your business.
Crowd-funding. Crowd-funding on websites like Kickstarter and Indiegogo give small businesses the big boost they need without forcing them to give up any equity stakes. The sites allow companies to raise money in exchange for rewards or products and through a number of investors, saving small businesses the hassle of having to find one sole investor. Crowd-funding has been increasing in popularity over the past few years. Just make sure to read all the fine print and disclosures before choosing a particular platform, as different sites will require different percentages of money raised through the site or other payment-processing fees.
Reach out to Friends and Family. While borrowing from friends and family with a tad bit of spare cash requires a great deal of humility, it also allows for an interesting and more relaxed alternative to traditional forms of financing with its omission of messy bank contracts and low interest costs, if even any.
There are many ways to go about financing your small business. Though it may seem like a long, trying process, there are countless numbers of programs and investors out there simply waiting for you to take your first step.