Building a business is a big commitment. Not only do you have to make sure your idea is strong enough to help you generate profits but you also have to make sure you have the money you need to start your company in the first place. Unfortunately, figuring out how to finance your small business so you can get things off the ground isn’t always as simple as you might think. You need to understand the options you have before you can make the best decision for your company’s future. Here are a few of the most popular ways to finance your company for long-term and sustained growth.
Traditional Business Loans
The easiest place to start when looking to fund your startup is your local bank. Most banks and credit unions issue business loans to qualified companies. However, each lender has different types of requirements they expect borrowers to satisfy before they’re willing to issue loans in the first place. Before you apply, you’ll need to familiarize yourself with the requirements for each lender you’re considering working with. At a minimum, you’ll need to provide proof of income, your business plan, your personal credit score and your bank statements. Lenders will use this information to evaluate your financial situation and your ability to repay the loan in full by the end of the loan term.Talk To the People You Know
Every dollar of debt you take on can impact your credit score. If you’re not willing to jeopardize your credit score by taking on a business loan, you can always talk to the people you know and trust. Ask them if they’d be willing to lend you money to help you get your company off the ground. Just make sure to treat those loans as seriously as you would a loan from a bank. Make payments as soon as you start bringing in money and consider adding interest to those payments to make the loan worth your loved ones’ while. If you want, you can always draw up a contract for the loan specifying your repayment terms.Look for Investors
One of the most popular ways small business owners get financing quickly is to work with investors. Investors are wealthier business owners that give you money in exchange for an interest in your business. The amount of interest they get is up for negotiation but if you’re willing to give them a larger stake in your company, you may end up getting more support and more money.
Consider Crowdfunding
If you’re not a fan of working with an investor and having to give them a portion of your profits for a set period of time, crowdfunding may be a good alternative. Crowdfunding allows you to leverage the internet and reach out to potential supporters without leaving the comfort of your home. If people agree with your business or like your products, they can contribute to your startup funds. In exchange for their contributions, you can offer them rewards like product discounts, branded merchandise and other high-value items. Just remember to keep the rewards in line with the size of their contributions. The more a person sends, the larger their reward should be.Partner Up
Sometimes, the thought of financing a company isn’t ideal. You want to bootstrap and raise your funds on your own. That doesn’t mean you have to do it alone. Many businesses form partnerships and run their companies with the help of another person that believes in the same vision. Your partner will share the same stake in the business and can contribute their savings and knowledge to better help you reach your goal. Just make sure you choose a partner that you can trust and one that you work well with.Financing a new business is challenging but doable. Think about your goals and choose the type of financing method that you’re the most comfortable with. Once you do, you’ll have the money you need to bring your vision to life.
