Discovering and developing business ideas can be very exciting, but they are just the start of a long yet thrilling journey. With a mature idea ready to be converted into a successful business, the next step is starting a business. Naturally, there will be some obstacles to overcome along the way, including financing the new business and getting it off the ground.
When it comes to financing a new business, there are actually a lot of solutions you can consider. Both mainstream financing options and alternative ones are just as appealing, each with its own advantages and disadvantages. In this part, we are going to take a closer look at three of the best ways to finance your new business.
It often doesn’t take much to start a new business, especially in today’s internet age. If you’re thinking about setting up a home business, you might not need to find other sources of financing at all; your savings and the cash you have are most likely enough to get the business going.
You can convert that old room you haven’t been utilizing into a home office. You can then invest in a good website and create social media profiles for the business. Of course, you still need to get the legality of the business in order, but won’t cost as much as you think.
Within a few days, you can start introducing your products to potential customers. Thanks to internet marketing instruments such as SEO and SEM, this is a task you can do without investing too much money in the process. You just have to be willing to invest some time instead.
This type of lean approach to setting up a new business means you have very low overhead costs, allowing the business to stay competitive early on in the game. You can also save a lot on interest and other costs associated with getting additional funding, while at the same time retaining 100% ownership.
Let me start this part by saying that you should never finance a business using credit cards. Even the most affordable credit cards are still too expensive and may put your business – as well as your personal finances – in jeopardy. It is much better and more responsible to take out an unsecured loan if you really need extra funding and you want to use a bank loan to get it.
Secured loans are better. They are cheaper and will not affect your personal credit history in a negative way. They are also more flexible since you can set a longer repayment term for the loan. This means you have a lower monthly repayment amount to worry about, allowing you to stay focused on growing the business.
Take the time to compare home mortgage loans or equity loans and find one that suits you best. Certain offers – such as an interest lock and free refinancing – can make the mortgage loan even more suitable for starting a new business. Don’t forget to calculate the risks and long-term cost of using the loan before making the leap.
Bring in Investors
If the business idea is solid and you don’t mind losing a part of the company to investors, then getting a few more people onboard can be a good thing. You can start by looking at acceleration programs designed to help startups and new businesses get started. These programs will not only help you with funding, but also pair you with mentors and grant you access to more resources.
I’m a bit against working with relatives, but family members can also be great investors for your business. You can have several relatives investing in the new business idea. Before you take their investments, however, make sure you have every detail figured out; things such as profit sharing and contributions to the company often lead to breakups and other issues if they are not worked out at the beginning.
Lastly, look for angel investors and connect with them directly. There are a lot of investors looking for the next big thing. Your upcoming business may just be what they want. AngelList is a good place to start.
We haven’t talked about other alternative sources of funding such as crowdfunding and project-based funding. These alternatives are also great if you are in the process of starting a new business based on a good product idea. If you want to know more about these alternatives, be sure to stay tuned for updates right here on Business Plus Baby.