It seems more and more people are taking the plunge into entrepreneurship. With the rise of the internet, the popularity of online shopping and the ability to dropship, launching a business has never looked easier, though there will always be challenges to face.
One of the largest and most common of these challenges is funding your venture. No matter what your new business is, it’s safe to say that you will need at least some starting capital. Whether you’re a fresh startup or a small business looking to grow, there’s a range of ways you can secure funding for your business. While no source of funding is necessarily easier to get than another, some sources may be better for you depending on your business model.
Pull yourself up by your bootstraps
The old idiom, which refers to doing something impossible like lifting yourself up by your boots, has come to mean doing something for yourself to better your position. Most experienced entrepreneurs understand that at least part of their funding will have to be bootstrapped.
Bootstrapping is generally necessary in the early stages of a business venture, before more formal funding options become available. Bootstrapping might mean taking money from your personal savings or using zero interest credit cards (just watch out for the revert rate). To find the right type of card for funding your business, use sites like RateCity to compare a range of lenders.
While bootstrapping means you must be confident in your vision and business’s success, having some skin in the game early on shows future investors that you are committed and confident in your business.
Approach family and friends
Second to bootstrapping, getting funding from family and friends is a popular route for new businesses. While it might be easy to get some cash out of mum and dad and your closest friends, you must be aware of the stress this can put on those relationships.
It’s often advised that if you do approach family or friends for funding, you only do so once you have a formal business plan which includes finance projections and evidence of how and when you will be repaying them.
Make sure your family and friend investors understand the risks they are facing. This will not only reduce the likelihood of nasty surprises, but it will also show them that you take their money seriously. While you will likely want to avoid as many fees as possible, getting legal advice for all parties can help ensure the agreement is legitimate and that there will be no future complications.
Work for a small business loan
The difficulty of finding funding for a new business largely stems from banks being reliably strict in giving out loans, particularly to online, digital businesses. This however, doesn’t mean they’re impossible to obtain.
Because of the specialisation it takes to secure a business loan, there are companies who focus solely on helping small businesses get loans. Companies like All Business Loans help match small businesses with lenders and do the work to help businesses get approval for funds. Getting a business loan is worth the extra effort for business owners who don’t want to give away any equity, or risk their personal relationships.
Take flight with an angel investor
Angel investors are notoriously elusive and hard to attract, but if you manage to do so, such funding can take your business to the next level. Often, it can be hard for new businesses to get potential investors to see their vision as they do. Most angel investors understandably want to minimise risk, so it’s important you can assure them of your business’s potential.
When it comes to winning over an angel investor, having assets like an experienced team, a detailed business plan with assessments and projections, and a lot of passion can go a long way.
If you do raise funding from an investor, it may be structured as a loan, or they may buy equity with their investment. If this is the case, it’s important to remember that you will then have to act in the shareholder’s best interests. While this may seem troubling, having an experienced angel investor or venture capitalist on your side can help immensely.
There’s a whole range of ways one can fund a new business venture. These four strategies are some of the most common but most effective avenues for new businesses looking to acquire funding. Each one requires a solid business plan and an understanding of how the funding will work, as well as how the extra capital will help your business.
