Planning to start a company? Having the necessary capital will ensure business survival. This guide will discuss three ways you can fund your startup.
When it comes to starting a company, there’s no denying that money is everything. Having enough capital simply guarantees business survival and enables you to conduct operations seamlessly. Not to mention that having the necessary amount of funds allows you to make purchases without having to walk on a financial tight rope.
As an aspiring entrepreneur, you may be looking for different ways to gather cash for your startup. Given that raising money isn’t an easy task, it’s easy to feel discouraged once you’ve taken a close look at a lender’s interest rates. But, luckily enough, you don’t have to stay by the book to secure capital.
Diversification is a good strategy for funding your business. Having multiple sources of cash ultimately gives you more flexibility and allows you to manage through various challenges. To get your business running smoothly as soon as possible, this guide will discuss three different sources of financing you can choose from.
1. Bank Loans
The lenders you see on the internet may entice you with low-interest rates, but don’t close a deal just yet. It’s important to know that fraudsters are lurking around, so you should be wary of suspicious credit providers to avoid falling into a loan scam.
While their terms and prices may not sound appealing, banks remain a more reliable and trustworthy source of funding. Bank loans are the most common source of capital for small and medium enterprises. If you’re planning to acquire one, then you should go rate shopping to find an institution that will meet all your needs.
As long as you have a good credit history and track record to back you up, there’s a good chance that your loan will get approved.
2. Government Grants
This may be a case-by-case basis, but many government agencies are generous enough to assist citizens in starting their businesses. While getting a grant may be tough, considering the high number of applicants, it’s still a good idea to get in touch with the relevant organizations and learn more about their program.
Most subsidies require you to pay back the borrowed amount of money in full; however, there are some instances wherein borrowers will only pay for a portion of the total amount. If you plan to apply for one, you’ll be asked to provide details such as a business plan and a brief on why you need the grant.
3. “Love” Money
If lending institutions have turned you down, you can always look to your loved ones for help. As you discuss your business plans with friends and family, there is a good chance that one of them develops a particular interest in your startup. If so, try to set an agreement with them so you can borrow your capital from them.
“Love” money is an excellent source of funds since payment terms are flexible, and it’s a transaction based on mutual trust. You can offer to pay off the amount you’ve borrowed through cash, or you may give them an option to receive a certain amount of shares in your company.
As good as this sourcing method may sound, though, don’t make the mistake of treating things lightly. A business relationship with friends and family is sensitive, and managing things poorly can lead to various issues, both personally and business-wise.
Start Your Business Smoothly
Apart from hiring the right people and attaining new customers, getting capital is a common challenge that many aspiring entrepreneurs face. While raising money isn’t an easy task, you can overcome this dilemma by diversifying your sources of funds.
Once your company is up and running, making it a point to be financially smart with installment purchases and practicing the value of frugality will ensure business continuity at the highest level.