One thing about starting a business that leaves people hesitant – often delaying or putting a complete stop to their dreams – is the idea of funding their business. However, it doesn’t have to be a scary or difficult process if you understand it from the outset. In fact,
With that in mind, here are some of the best ways that you could be earning the money to start your business.
Investors – Yes or No?
Some people are all for investors when it comes to starting a business, while others try to avoid them as if they were the common cold. If you’re looking for investors, however, there are a few things that you need to look out for when doing so. One thing to remember is that you’re not looking for cash alone, you’re actually also searching for an individual who can add an appropriate level of value to your business.
The key is to have confidence in your business idea. In most cases, you won’t receive investment the first or even second time that you pitch. However, so long as you don’t let these knock backs effect you too badly you should be able to present your idea well enough at some point to earn investment. Be articulate, express your love of the idea and exude enthusiasm. Doing so can help make a potential investor love your business, mainly because you do.
But, a word of warning when it comes to investors. When it comes to a souring of a relationship it can be much harder to get rid of an investor compared to an employee. In fact, you could even find yourself being ousted from the business depending on their level of shares and power. So, a word to the wise: be cautious.
Bootstrapping
On the complete opposite end of the spectrum is bootstrapping. This is where you don’t seek any investment whatsoever. What this involves is bartering with other businesses or startups for services or products, basing yourself in a shared office space and only using free tools for marketing and servicing.
Note: this is much easier if you are a service-based enterprise. If the whole point of your business is to produce a product, then, materials and assembly are an inevitable cost. However, bootstrapping is a very real strategy in the modern business world for those outside of this product scope.
Pledge Earnings
If you are willing to bet on your future earnings, then you might be able to just that in order to secure funding. Some might call it reckless. But, if you truly believe in the power of your business idea then it may actually be a worthwhile strategy. This comes as a personal investment contract, the legality of which can be a little iffy (always better to have contentious probate solicitors on your side in this situation). However, the basic concept is that for 3% of potential lifetime earnings you could get $300,000 right now. And so on and so forth up to what you are willing to part with.
There are many issues when it comes to this type of funding. Such as the fact that 3% of your lifetime earnings may end up to be very little if you fail and convincing someone that you won’t fail in the first place can be extremely difficult. Ultimately, this is probably the investment tactic you should be most wary of but worthwhile knowing about nevertheless. If this does go wrong, however, remember you may end up needing litigation solicitors Manchester.
Microloans
Though you may not be able to secure investments or loans from a traditional method, that doesn’t mean that nobody will lend to you. A microloan can range from anywhere between $500 and $20,000, which doesn’t necessarily have to come from a bank. The interest rate is typically much higher, but the level of underwriting involved is typically not that extensive (making it easier and faster to obtain in most cases).
These types of loans are really aimed at a business who is already established, but facing an incoming capital gap. The microloan can help to mitigate the problems caused by this and help take you to the next stage more smoothly. It should be considered carefully, especially as ideally you want to pay it back as quickly as possible. Otherwise, you will be stuck paying back the high-interest rates.
Crowdfunding
This is a type of business funding which has really taken off in the modern world – especially with the rise of Kickstarter. Why? Well, for many reasons. But, largely because it equates to free money in exchange for a set level of product or services in return. For example, if a person were to crowdfund a launching of a book then they would expect to receive that book at some point in the future.
However, one drawback of this is if you do not, in the end, put out a product to backers you can draw quite a negative reputation. For both yourself and your company. You need to make sure you can deliver in order to deserve the money in the first place.
Conclusions
Ultimately, the way you find backers for your small business depends entirely on your business and current position. If you need money to lift off, then investors and crowdfunding are vital. However, there are also plenty of other options if your situation isn’t quite that precarious.
