Different Ways to Finance Your StartUp Business

A startup business has the potential to expand and turn into a big enterprise.  Just look at corporations like Apple and Hershey. They all started out as home-based businesses. Today, there are many advantages you can enjoy by having a home-based business. You are not only a boss, but also you have time flexibility. You even get tax benefits for using part of your home for business purpose.

Nonetheless, running a business comes with extra costs.  That means you will need sufficient working capital. Luckily for you, there are several ways you can finance your small business. Every type of financing has its advantages and disadvantages. Below we explain the different ways of funding your small business.

    1. Crowd funding

Crowd funding is an innovative way of accessing funds for your small business. Many companies use this approach to raise money for operating their business. In crowd funding, a group of people collects money, which they use to support a business. Typically, the crowd funders use the Internet is their medium of communication.  For crowd funding to work, you need a top-notch business idea. If your business idea can yield profits, you will win people over. One benefit with crowd funding is that once you raise the money, you will not have to pay it back. If you wish to try crowd funding, visit sites like GoFundMe, Indiegogo, and KickStarter.

    2. Loans facilitated by SBA

Small business loans

The SBA will give a loan guarantee for start up businesses that qualify for this program.  You need to find a SBA lender who will take you thru the steps of applying for and obtaining the loan guarantee.  The SBA isn’t just a source of financing.  They have lots of resources to help you run your business successfully.  They also have local groups of retired business executives called SCORE that are ready and willing to help mentor you as you start your business.  Working with SCORE is free and you can find your local chapter on the SBA.gov website.

    3. Using the Bootstrap techniques

Another way to look for funding for your small business is through bootstrapping. The process involves using the revenue you generate from your business to run it. It is an on-going process. This alternative is for those people with enough capital to start a business. The good thing with bootstrapping is that you will have minimal debts. Also, you will less financial risks. All the same, expect your business to grow slower than someone who has bank financing. You won’t have access to capital to promote your business, buy new equipment or hire new employees right away like they do.   The good thing again about bootstrapping is that you will not go into debt, and if your business doesn’t work out.  You can walk away without having to file bankruptcy.

    4. Use your savings

You have probably heard other people say that using your savings to support the business is not wise.  Still, you do not have to listen to what other people are saying. If you are confident that your business idea can generate revenue, go ahead and use your savings to grow it.

    5. Family and friends

Make sure you approach them in a professional manner. Consider it as borrowing a loan from a bank. Just because you know them does not mean that they should fund your business. Pitch to them just as would approach a lender or bank. Also, it is not a guarantee that your company will bring in returns. So be aware that by defaulting on this sort of loan, you maybe creating a large rift in your family or lose good friends.

    6. Peer-to-Peer lending

With peer-to-peer lending, individuals raise funds to support a business project. Typically, several people merge and pool resources to generate a single loan. This investment then goes to an individual or business. If you raise money through P2P lending, you have to repay the backers with interest fees.

Peer-to-peer has one major benefit; it is workable. On the downside, it can be costly.  Your interest rate will depend on your credit and the perceived risk of your business.   So if you are a business executive with 20 years of management experience in the same industry you are starting a business in, and you have excellent credit.  Your rate will be lower than someone with little or no experience and average or bad credit.

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Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

1 Comment
  1. This article offers some useful tips on how to finance a start-up business. I agree that bootstrapping, crowdfunding, and angel investing are some of the most popular and effective ways to raise funds for a new venture. However, I think the article could have also mentioned some of the challenges and risks involved in each option, such as the difficulty of maintaining control, the uncertainty of meeting the funding goal, and the legal and ethical issues of dealing with investors. I would also like to see some examples or case studies of successful start-ups that used these methods to launch their businesses. Overall, this is an informative and helpful article for anyone who wants to start their own business.

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NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

Privacy Policy Terms of Use

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