A lot of really unbelievable business ideas never come true because they need money to make them a reality. How can you get this amount? Here are five ways:
- Self-finance your business
Self-funding your business means that you own 100% of the business; however, it can be difficult to earn an amount at once. So, what can you do?
Consider slowing things down and funding your business over time. This means keeping a full-time or part-time job with the goal of saving money to launch or using your work to actively fund ongoing business activities.
If you have savings, you can use it and then plan payback for yourself later as your business grows and (hopefully) profitable. Using 401 (k) to fund your business is also an option but be aware that you will ins bear an overly expensive penalty and lose the ability to grow long-term for your money. This is really, really a last-minute option. Think long and hard before depriving yourself of the money you have worked hard to save in the future.
Funding your business with a credit card is not recommended unless you can pay in full monthly or you have a firm plan to return the money as soon as possible. You should also consider taking advantage of as many free and inexpensive business resources as possible to keep your business costs low.
- Ask for money from family and friends
Funding your business with money from family and friends is a very popular approach. These are people who know you, trust you and believe in your business ideas. However, it is very important that if you choose to go down the path of family and friends, you have clearly established terms that all stakeholders agree on.
Questions to consider when setting up terms and conditions may include: Do you give away equity in exchange for a loan? How and when will you return it? Will your friends and family have the privilege of making decisions because their money is invested? Asking a lawyer to review the terms and conditions is definitely a good idea. Judge Judy built an empire based on people arguing about these things. Write it all in writing and plan to do what you said.
- Bank loans
Getting a loan from a bank to fund your business means you don’t have to give up part of your business in exchange for a loan, which is amazing. However, it also means that in order to qualify for a bank loan, you need to have personal and/or good business credit.
In addition, before you are eligible for a loan, the bank will want to see your business plan which details your business activity, marketing plan, earnings forecast, and all the other good details. They will need you to prove that they do not take excessive risks by lending you money.
- Leverage angel investors
Angel investors are often high net worth individuals who invest in what they consider viable business in exchange for a stake, a la Shark Tank. They can also make (or participate in) important business decisions for the business based on their equity. If you choose the angel investor path, make sure you understand all the details and have reviewed all the terms and conditions of the contract.
Also understand that once your business starts making money, your angel investors will most likely be the first on the paid list, before you.
The benefit of using angel investors is that they can give you money to grow your business and have the insight to stay active.
- Follow the path of crowdfunding
If you’re trying to raise funds for a product, crowdfunding might be right for you. Basically, that’s when a large number of people, usually online, contribute a small amount of money to your business in exchange for something. Typically, you can use your product early and privileges such as future discounts. Kickstarter, GoFundMe, and Indiegogo are the big three companies. Consumers have a great ranking page for these sites (and their smaller competitors) that provide insight into the nuances of each platform.
You can be a great success with crowd funding, but it’s a completely separate hustle.