Do you have a fantastic idea that you know can turn into a successful business? Like many, you may dream of starting your own gig but are held back because of a lack of resources. Opening a company, even a small one, costs money, and if you don’t have enough to keep the business afloat before it becomes profitable, it may crash and burn quickly.
While it’s an excellent idea to self-fund a part of your business, it’s not advisable to sink all your savings into it. Whether your new business will be a side hustle to compliment your 9 to 5 until it takes off, or if you’re taking the plunge and quitting your job to focus entirely on it, it’s essential to have some money in savings.
Businesses take a while to become profitable, so you will need money to live off, and even if you keep your full-time job, you never know what emergencies may creep up.
For this reason, it’s good to put only a portion of your savings towards the business and find other ways to make up the balance you need. Continue reading to learn about different ways to raise capital for your business:
Get a Business Partner on Board
Having a business partner means you would both contribute capital to the business. Before looking for a business partner, you must decide on the type of partnership that will work for you. Do you want someone who will be involved in the operation of the business? If so, think about how decisions will be made and who will have the final say. Suppose you want complete control of the running of the business. In that case, you may prefer a silent partner who will not be involved in the operations but will collect dividends when the company is profitable.
If you keep your full-time job, bringing on a partner who wants to contribute to the company’s operation may be beneficial. Apart from helping fund the business, a partner may also be invaluable to the company’s growth by providing skills and expertise you may not have.
You must decide how the partnership will be split, whichever arrangement works for you. The split is primarily based on contribution. If it’s a 50-50 split, you both will need to contribute the same amount of money and resources to the business, but you may decide on a 60-40 division or another percentage.
Make Use of Loans
As a new entrepreneur, you probably won’t be eligible for a business loan as banks usually give these to established companies in good financial health. Still, you can apply for a personal loan because it can be used for anything, including funding a new business. There are as many personal loan options as there are ways to spend them, so to narrow down where you should apply, check your credit score.
People with good credit scores, which are above 580, should apply to traditional lenders like banks. Banks usually offer personal loans with reasonable terms, which can be anywhere between two to seven years, and low-interest rates. It gives you sufficient time to pay the loan off comfortably.
Credit scores below 580 are considered low, so people with these scores are less likely to qualify for loans from a bank. If your rating is poor, you can still apply for a personal loan from other lenders, for example, CreditNinja internet options or other online lenders.
It’s helpful to get a few quotes from different lenders and compare the terms, interest, and fees before settling on the right one. The most convenient way is to apply to a lender’s network site. These sites allow you to fill in your details and loan request once, which is sent to a few lending companies. Each lender will look at your application and send you quotes.
You can use your credit card if you prefer not to apply for a new loan. Most businesses accept internet transfers, so link your credit card to your checking account on your banking app and transfer money from your credit card into it. You can then transfer the money to whoever you need to pay.
Just be sure to pay off your credit card within the billing cycle, as interest on credit cards is high. Using a credit card is efficient because once you repay what you’ve spent, the amount is replenished, so you will always have credit for your business needs.
Crowdfunding has become a popular way to fund a business. It does not require a significant financial commitment from one person. Instead, it relies on many people contributing small amounts. The more people who contribute, the more capital you raise.
Crowdfunding usually works for companies with new, innovative products that excite the public. You need to be creative and reasonably tech-savvy to create a crowdfunding campaign that gets people’s attention. You can use crowdfunding websites like GoFundMe to set up your campaign and then promote it on social media to reach more people.
You can offer free products, special discounts, or equity in your business to get people to contribute.