A lot of people out there want to start their own business, since after all there are few things out there that are as exciting as being your own boss. However, even though this can be a great thing, it can also be very difficult to start a business. Apart from the need for a great name, a great business idea, business plan and a great product to sell, something that a lot of people forget about in the spur of the moment are the money. No matter what kind of business you are starting, whether it be an online or a physical business, you will need a significant amount of money to get you going. Of course, you may need a little less money if you are staring an online business, but you will need money nonetheless. If you are someone that is struggling with this, then make sure you keep reading because we are going to be talking about ways of financing a small business in order to help you get a better idea of some of your options and what you need to focus on.
Before we move on to some of the financing options that you have, we are going to stop and take a look at what financing actually means and some of its basics in order to get you on the right path. The simplest and easiest way to explain business financing is to say that it is a way that will give you money which will then help you start your own business. This means that you while you can pay some of the upfront costs and then cover everything else from the cash flow that comes in, a financing option means that you won’t have to spend any of your own money to cover these costs. In fact, looking outside of your business in order to find it is one of the best things that you can do for it, so knowing your options is a great idea.
Now that we have taken a closer look into the financing part, we are happy to say that you have several different options when it comes to financing a small business. Some of these options include:
- Business credit cards,
- Angel investors,
- Friends and family,
- Personal savings,
- Crowd funding,
- Mezzanine loans,
- Invoice factoring,
- Merchant cash advances,
- Lines of credit,
- SBA loans and more.
There are many more options out there, however today we are going to be sticking to a few of our favorite ones amongst these, so make sure to check them out.
Business credit cards
The first thing that you will probably notice is that business credit cards don’t technically fall in the loan category, however they will still offer a lot of advantages when it comes to financing your small business with them. First of all, this is probably the easiest way for you to apply for a “loan”. The whole process involves filling out a few documents and giving them to the bank, and after that it is up to them to make a decision. The decision should come to you in a few days, and if everything is ok with your personal finances there really shouldn’t be any issue. Some of the other benefits are the fact that there are usually special deals for small businesses, there are pretty high credit limits that can be paid through easy portals and so on. Using a credit card will also make your bookkeeping much easier, which is always great. A downside that we have to mention is that business credit cards usually have a much lower amount of money than a traditional loan, and you also want to be careful not to over-use it so as to not tie it up.
If we were to choose a favorite way to finance a small online business, then it would have to be angel investors. These are people, usually older, that have the time and the money, as well as interest, to invest in small businesses that are just starting out and to help get them off the ground. A lot of people don’t really understand this concept and often wonder what these people have to gain from giving you a loan, however we feel that this is pretty easy to see. When they give you a loan they essentially own a percentage of your business and if your business does well, then they are set to get a good amount of profits back. However, we need to put emphasis here that it is very important that you find an angel investor that can be a good partner to your business. You want someone that understands what you are doing, what your business is all about, that will give you good advice, but also give you enough freedom to work on your own when you have to. This is important because the last thing you want is to have serious disagreements with your invertor and to feel like you have to do certain things that you are against in order to keep the investor happy.
Friends and family
The last option that we are going to discuss is one that we have to worn about from the very beginning. Before you even get into any kind of business relationship or agreement with any family member or friend, you need to make sure that there is a lot of understanding and respect there. Having someone in your friend or family circle that can help you fund your small business is a great thing and it can help you avoid going to banks and looking for outside investors, however you want to make sure that everyone has very realistic expectations and that all cards are on the table. You need to make sure that you are outlining everything to your friend or family member as you would to any traditional lender because no matter your personal relationship, you need to make sure that there is a professionalism there as well. Even though this can be a very useful way of funding your business, the last thing you want is to lose a friend or fall out with a family member over money.
Starting your business is possible even if you don’t have all of the money yourself, and this article definitely proves that. We hope that you liked learning more about small business funding and some of the options that are available to you, as well as getting a better look into our favorite ones, and that you will use this knowledge to your advantage.