So, you’ve decided to finally leave your job and start your own business. But now you’re facing a serious problem. How do you finance your exciting idea? Setting up a business isn’t cheap, and you will need money in your account from day one. Thankfully, there are a few possibilities that any business owner can consider to fund their new company.
This is perhaps the most attractive possibility. With crowdfunding, you can essentially get existing or future customers and clients to fund your business and make sure that you have the money you need. There are a few things you need to be aware of here. First, crowdfunding is often an all or nothing scenario. You’ll set an amount you want to raise with a time limit. If you reach your goal in time, you get all the money. If you don’t, you get nothing. Second, crowdfunding is a very popular resource and to succeed here, you need killer marketing, community support, and a captivating idea. You have to be introducing something new to the market that gets consumers exited. There are various crowdfunding resources such as Kickstarter you can explore.
2. Installment Loans and Balloon Loans
You might also think about using a loan to setup your new business. With a loan, you get the money you need quickly, but unlike crowdfunding, you will need to pay the money back. Loans come in all different shapes and sizes and you need to find out which loan type is the best for you. A simple option would be to invest in an installment loan. With an installment loan, you pay the money you owe back in installments each month including levels of interest. You can work this into your business budget and estimated revenue.
The alternative would be a balloon loan. Here, you pay the interest each month or each quarter, but the total amount you owe is paid in one final sum at the end of the loan contract. This provides you a lot more financial freedom and gives you the chance to increase your business profits before you pay the money back.
Rather than beginning their business with a loan, a lot of business owners will consider bootstrapping the best method. With bootstrapping, you will scrounge together any personal finances you might have to pay the starting costs of your business. This could include anything from saving accounts to credit cards and property. It’s risky because if your business fails, you will lose it all, but you won’t have any loans or monthly repayments. This can be incredibly freeing for a young startup fresh on the market and allow your company model to be a lot more flexible.
4. Secured Or Unsecured Loans
You can also look at secured and unsecured loans as options for financing your business. A secured loan is a fantastic choice because it will usually grant you access to lower levels of credit. However, you do need to be prepared for the risk here. The loan you take out will be secured with property or products that you own. If you are unable to pay the loan back, then the lender will be able to sell that property to get the money that they are owed.
Alternatively, unsecured loans often mean a higher level of interest but there’s less risk because nothing is used to secure the loan. Instead, a lender will look at your credit history and determine what type of plan they can offer you. This is why before you start your company, it’s a good idea to fix your credit score.
5. Micro Loans Or In Line Of Credit Loans
Finally, you might be creating a business that is linked to a philanthropic cause. Perhaps your products or services are designed to help those in need. Or, maybe, you have included a charitable set up into your business model. In either case, you might be eligible for a microloan. Usually available for startups involved in charity work these loans provide small lump sums to get promising entrepreneur projects off the ground so that they can do some good in the world. Often, the loans provided are given by individuals who donate to a cause which means that this should be used when you have no other option.
If you are in a financially secure situation and you do have a solid level of financing, you can consider a line of credit loan. With a line of credit loan, you can make sure that you are never in the position where you don’t have the money you need to pay for inventory as well as operating costs. With an in-line of credit loan, you can make sure that your cash flow never stalls for your company.
These are just some of the possibilities you can consider for funding your new startup or self employment plans.