It takes more than quality ideas and dedication to have a successful business venture during this trying time. Before you could turn your dream business into a successful reality, you will need to find ways to finance its inception.
The initial step in choosing the best financial source for your business is to determine how much startup funds you need. Not all financing techniques would apply to just any business venture. Every business model has different needs. You have to figure out the most-suited financial solution to kick-start your business.
In this period of economic decline, ravaged by the pandemic, finding a reliable and sustainable source of capital could be quite challenging. Although the world governments are initiating programs to stimulate the economy and encourage entrepreneurs, becoming a recipient of such programs is similarly difficult due to steep competition.
To help you decide the most viable financial solution for your business startup, listed are some tried and tested options you may check out.
Consider Self-Funding
Self-funding comes in different forms. You may tap into your 401k, your savings account, or even sell your car or apartment to raise money. With these in mind, not all entrepreneurs are keen on self-funding.
On the bright side, there are several benefits if you consider self-funding to start up your business. Using your hard-earned cash in your business enterprise is a great training ground to pave your way in becoming a savvy entrepreneur. It makes you more mindful of every dollar you spend and earn in your trade.
Furthermore, self-funding entails you have complete control over your business. You can pave the future of your business the way you want it. The downside of that, however, is that you take on all the risk yourself.
Attract Angel Investors with Your Business Idea
Another great option to start your business is to attract angel investors. Attracting angel investors is ideal when your startup business requires a large amount of money, which you cannot raise on your own.
Angel investors are professionals or seasoned entrepreneurs eager to assist young startup businesses, which they deem to have potential investment value. In a report of Entrepreneur, it was stated that “angel investments commonly run around $600,000.”
With such money at hand, you can jump-start your business plan with ease. However, the downside of angel investment is that you will be giving up between 10 and 50 percent ownership of your business to your angel investors in exchange for the financial assistance.
Opt for Crowdfunding
A more efficient way of raising money other than traditional fundraising is through crowdfunding. Not only will it double your market reach and media exposure, but it is also an opportunity for you to refine your business ideas.
But you have to select the best platform. Similar to GoFundMe, many crowdfunding websites can help you reach potential business financiers.
Another thing to keep in mind if you opt for crowdfunding to help finance your business startup is to make your campaign as attractive as possible. Persuade your potential investors why your business startup deserves to come to life. Explain your business advocacy. Nothing beats a good story.
Secure Small Business Administration (SBA) Loans
Small Business Loan is suitable for entrepreneurs who want to retain total control of their enterprise but do not have enough capital to start their business. SBA loans offer generous term lengths, caps on interest rates, and financing up to 80 to 90 percent of your business startup cost.
Furthermore, compared with traditional bank loans, SBA loans have lower down payment requirements. It is guaranteed by the Small Business Administration, while a traditional bank loan is not.
However, there is a catch if you opt for SBA loans in your business startup. It is a standard procedure in granting SBA loans that borrowers provide collateral as security for the loan. A borrower has to put a lien on personal assets before the loan could be granted. As a starting entrepreneur, the threat of losing your personal assets could add as a burden.
Final Thoughts
In choosing the best available option to finance your startup business, you need not be fainthearted. After all, the business world is not for those who are afraid to take risks.
Instead of viewing the ongoing pandemic as a hindrance to start a business, a true entrepreneur sees this circumstance as a business opportunity. New demands are rising that need to be met. Furthermore, there is no such thing as a “perfect” time to start a business.
If you want to truly succeed in the entrepreneurial industry and fulfill your dream business, do not put limits on yourself. No matter how risky and unconventional the path you are taking may seem to others, do not be afraid to believe in yourself.
