Starting a business is no easy thing. It takes a resilient approach, dedication, hard work, and sleepless nights to see your business aspirations come to fruition. If you don’t have what it takes for a business start-up, then it’s high time you considered other options.
When starting a business, whether small or big, you need access to capital. Unfortunately, and according to most entrepreneurs, this is the most challenging element in business startups. You need to be financially stable in your initial rollout projects. Your very first employees will need to be paid, you’ll need an inventory, and most importantly, funds to register your business. Now, even with so many business financing options out there, it’ll be a daunting task finding the best option suited for your needs, and this is where this article comes in.
Below are easy steps to finance and start your business:
1. Micro Loans From Private Lenders
Many nonprofit and private lending companies will be willing to give small loans to startups as a way of promoting entrepreneurship. Small businesses, especially those that do not qualify for bank financing, can find microfinance options a great help. Now, in line with the recommendations from the guys at BugisCredit.sg, you don’t need to have collateral or an excellent credit score to secure a loan with microfinance institutions or private lending companies. All you need to do is show a sound business plan, repayment structure, and an alternative source of income. The downside is that most private lending companies when compared to banks, will charge higher interest rates for loans.
Private lending companies are ideal for startups and small businesses facing capital gaps. Through this financing option, existing businesses have been able to service contracts and purchase new equipment.
2. Funds from Family and Friends
Family and friends are always the first investors to believe in you. They will risk the little they have, even if you don’t have existing customers, collateral, revenue, or workable ideas. This may include your parents, spouse, or close friends. Approaching family and friends with your new ideas may seem to be the easiest way to finance a startup. The caveat with borrowing from family members and friends is that it can strain personal relationships, especially if you agreed to repay and fail to do so.
You need to first prepare a formal business plan before you turn your loved ones and friends into creditors. Showing them your financial projections, evidence-based assessments, a strong business plan, and a smart repayment plan. However, you need to remind them upfront of the risks involved and the possibility of losing.
When borrowing from your loved ones, you should be aware that:
- They rarely have much capital
- Failure to repay can jeopardize your relationship
- Some family and friends may want to have equity in your business
3. Bank Loans
This is a no brainer. It is the most commonly used source of funding for most startups. You need to keep in mind that borrowing from a bank has its advantages and disadvantages whether it’s a customized repayment or personalized service. That said, you need to do your research when looking for a bank that will be able to meet your specific needs. Banks will only risk their money when you demonstrate an excellent credit score and a good track record. Startups need to not only have a solid idea, but it also needs a strong business plan. ‘
With the economic crunches, banks have gotten stricter and it’s important that you conform to the laid out regulations and requirements.
4. Personal Investment
Many people are now quitting their 9-5 jobs to start their own business. As the number of solo entrepreneurs keeps growing, banks are becoming increasingly reluctant to take any chances due to the rising number of loan defaulters. Starting a business with your own money or collateral on your assets is one of the risk-free options you can think about.
Many banks and investors will chip in if they see that you have already set aside funds for your project. It shows a long-term commitment to your projects and that you are ready to take risks. Investors will only put money into a deal when there’s something to show for it.
5. Government Grants and Subsidies
Other financiers that can fund your startup are government agencies. Getting government grants and subsidies can be tough, but this is tough due to competition and stringent standards. To qualify for grants, you’ll need to have an upfront startup amount, say 40% of the total amount that you need to start a business. Government agencies may also want to assess your level of expertise, your need for the grant, detailed business plan, your project description, among other things.
Now, how about that? The above are easy financing options that you may want to consider for your business start-up. But before you choose just any option, it’s important to have a sit down with a financial advisor or someone who’s been there before. They’ll help to provide you with crucial insights on what to expect and the ins and outs when it comes to business financing.