When you’re starting or running a business, it’s important to have a clear understanding of the different business funding options available to you.
Some funding options are outside of your control, such as bank loans or venture capital. Relying on these sources of finance can take time and ultimately lead to your business never starting up.
It doesn’t have to be like this, there are also a number of funding options you can control. Here are a few of the most common sources of business funding you can control:
Below are some suggestions for you to raise the finance you need to start your own business.
This is probably the most common option. You use your own money to finance your business. This can be a good option if you have the money to spare, but it can also be risky.
Even if you want external finance from a business angel or bank it’s pretty simple, if you believe in your business, you will invest in it. Investors will be reluctant to invest in a company where the owner has not invested some money.
Do not risk your overall financial well-being of your business, but you should be prepared to invest. Keep a track of just much of your personal money you have put into your own business.
Convince Your Friends & Family To Help Fund Your Business.
It’s a lot easier to get capital to start up your business from members of your family or friends than a bank or through private equity. The main drawback is the added pressure that comes from obtaining the money from them.
When receiving money from family and friends it’s always a good idea to get it written down so everyone is clear. It should be clear whether the sum of money is a loan or equity investment, this avoids confusion in the future.
Bootstrapping is a way of self-financing your business venture, most of it down to use your own resources. Because you have cash restraints you find ways to save money and innovate. Bootstrappers find bargains, utilise free and freemium services, crowd-sourced work, use open source software and do whatever it takes to make their business work within their budget.
Bootstrapping isn’t all about saving money. You can help elevate your business by finding resources or premises that can provide your business with added prestige and help build your reputation.
Two more traditional ways of bootstrapping are:
Invoice finance is a great way of funding your business through your sales. Cash flow for small businesses is tight. Invoice finance allows you to receive 80%-90% of your sales within a couple of days instead of 30 or more days.
Don’t get hung up on owning everything in your business. If the asset you are purchasing goes down in value over time then you should lease the asset. Leasing (renting) instead of buying assets and equipment relieves pressure on your business’s cash flow.
Bootstrapping can be a slow process, but it can be a great way to maintain control over your business.
There are several business funding options available to you. Most businesses are funded by the entrepreneur and their friends and family. This is usually your best option. The obvious drawbacks are you could be risking the financial well-being of yourself, friends and family.
The advantages are you keep the majority of your business. You have the freedom to run your business how you want to and probably most importantly you don’t have to wait and apply and pitch your business idea to anyone.
Make Your Business A Success
The key to a successful business can be found in our Business Success Formula. If you structure your business using the Business Success Formula as your blueprint you will decrease your chance of failure significantly.
We assess your business and implement our business success formula in our business assessment service The Business 360. It provides you with all the information to 10x your business in a matter of weeks. You can check it out here.