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Awesome post from Elise Forster at InterestPiggy! Enjoy!
In this competitive era, you need to have an exceptional idea if you want to start your own business.
Establishing your business based on an out of the box concept will enable you to target or capture more customers.
It’s obvious that whenever you start your own business it will be a small scale one, unless you have a million dollars in your bank account. Once you are sure about what your business will be all about the next concern will be regarding financing it.
In this post, I have shortlisted some of the ways in which you can get financing for your small scale business.
1. Self Finance Your Business
There is no better way than financing your new business by your own. For this, all you need to do is have a clear idea regarding all the assets that are possessed by you. The best way is to get an equity loan by mortgaging your home. Many entrepreneurs have adopted this path of mortgaging or selling their possessions or property.
You will be able to receive a loan in lump-sum form from any of the banks that you will approach. The best part about this is that the interest charged on these type of loans is pretty low. You will also receive certain tax benefits on these loans.
2. Taking Assistance from Family & Friends
Apart from self-financing your business, taking monitory help from family and friends is also a popular choice. For this, you must be able to present the entire concept of your business to them. You should convince them that the business will be a profitable one and their money will be utilized in the best possible way.
Your family and friends are a source of reliable and flexible option for financing your business. One thing that you need to avoid over here is putting pressure on them.
3. Acquiring Loan from a Bank
This is one of the first sources of loan that will strike any entrepreneur’s mind.
Banks are among the largest Financial Service Providers. It is one of the most traditional approaches for financing that every person follows for buying any asset. In this process, you will have to visit a bank. There will a loan application form that needs to be completely filled by you. This form will ask you to fill some basic information about the business that will include the type of your business, products and services offered by you, the legal structure and much more.
However, in recent times acquiring loans from banks is not as easy and straightforward as it used to be. Seeing the increase in the number of defaulters many banks have now adopted stringent policies. As a business owner, you may also end up taking a loan at higher interest rates when compared with other money lending options.
4. Alternative Sources
In some cases, banks are not willing to finance small-scale businesses due to the degree of risk involved with them. Such a situation can sometimes prove to be beneficial for a business owner. By taking loans from a private company you will be able to enjoy the flexibility that they will impart you. These companies are not dependent on other organizations and make decisions on their own. You can get a loan at the Best Interest Rates. There are no strict restrictions that are imposed on the loan that you receive from them.
The amount that you receive from these alternative sources will not be as huge when compared with that of a bank. However, depending upon your requirement you can choose any source that best suits you.
5. Angel Investors
Angel Investors will be of a great help to you especially at the initial stages of your small business. They will demand a return of approximately 25% on the investment that they have made in your business.
Along with Angel Investors, Venture capitalists also help in the growth of the new or the small businesses. But these will need a confirmation from you that your business will generate revenue on a consistent basis. They will also set a certain time duration for recovering the investment that they have done in the business.
6. From Equity investment
You can offer an investor ownership in your business in return of the investment made by him. This is known as an equity investment. In this, you will have to decide the share of ownership that you are willing to give and at what cost. One aspect that needs to be taken care of is the percentage of ownership shares that you give. There should not be a situation where you lose your control over the company.
In Equity investment, you can get money from any individual or company into the business. Money in the form of personal savings, from business partners, stockholders, friends and relatives is included in equity investment.
Crowdfunding has gained widespread popularity in recent times. It is based on web projects that provide an opportunity to individuals for showcasing their project or business idea. By the medium of the web, these individuals can reach to a large number of potential investors.
There are many platforms of crowdfunding that are available nowadays. Before jumping into these platforms, you need to have a proper strategy and plan. By this, you will be able to approach the investors in the best possible way. One amazing thing about crowdfunding is that what all money you earn is all yours. There is no need to pay the money back to any person or organization.
Before finalizing any source for funding your small business it is important that you explore each of them.
The best way to go about it would be to choose a combination of any of the funding sources.
Considering all the available options becomes important as it reduces the chances of making a wrong choice.
You can even consult a Financial Advisor if you feel that you won’t be able to make a right choice for your business.
About the Author:
Elise Forster is the blogger here. She is also working as a Financial Advisor at InterestPiggy. She is an entertaining and humorous speaker that enjoys captivating audiences with stories, anecdotes and messages that inspire and motivate others to achieve their goals. Follow her company InterestPiggy on Twitter.