Obtaining funds to start or keep a business moving is one of the significant challenges you may face. You may prefer the more conservative ways of getting money, such as saving or asking friends and family members to finance you. However, there are other ways, such as taking a loan, using credit cards, and angel investors.
The following are ways you can get finances to build your business.
1. Personal Savings
Using your savings is a welcome idea since you do not have to contend with the lender. It is a safer method of solving payment and merchant solutions in the business. However, it is not ideal since you may not have a stable source of income to get some to save.
You can save through insurance policies, retirement plans, or from the sale of your house. However, before taking out on any of these plans, you may consider talking to a financial advisor. The business takes time to become successful, and if you are not lucky, you may end up losing everything.
2. Use Credit Cards
Having a higher credit score can help you benefit from credit cards. You can use it to pay for your supplies and while at it, earn rewards, discounts and get protected to a certain extent. You can also get cash advances from your credit card company.
However, cash advances are costly and should not be your priority. Remember when using credit cards to pay effectively so that your credit score does not get affected.
3. Borrow From Friends and Family
If you have reliable family members and friends, you can borrow some money from them. You can also ask for a loan or sell them a part of your business as part of equity. However, there is a problem with this source of income.
Just because family and friends are known to you, does not mean that they will gladly finance you. Another thing is that you may lose relationship ties with them if the business goes south, and you cannot repay them.
Having close relations as partners can be tricky and often times leads to family turmoil. For example, your investors may want to have the upper hand on the decisions of your business. Neglecting their advice can bring bad blood between both parties, thus impacting the company negatively.
4. Taking a Business Loan
Banks are your go-to place when you want to get a loan for your business. You get to pay the loan in installments after a given period. Your business’ cash flow is a significant determinant when soliciting a loan from a bank.
If your records are not promising, then getting a loan can be hard. Before going for a loan, you need to review your business first. If it can survive without a loan, the better for you, and you should consider it as a last resort, especially when starting a business.
5. Getting Angel Investors
Some individuals and groups are willing to invest in your business and are known as angel investors. The investors offer your business the guidance, financing, and advice it needs. Getting this kind of investor at the start of the company can be hard.
They need to see potential in the business before committing to it. If you get lucky and get an angel to invest in your business, take advantage of it as you stand to benefit a lot more than finances. Before reaching the angel investor, do due research from a reputable firm.
6. SBA Program
You can get finances for your growing business from an SBA microloan program. The program deals with intermediaries to provide loans to businesses. These intermediaries offer you training and assist you with management skills to run your business.
With the kind of help, they provide your business is likely to stand. You can pay the loan back on time and use the skills from them to establish yourself. It is one strategy that is most helpful for you as an entrepreneur.
Sometimes your business may have hurdles with cash flow. Your customers may be causing the snarl-up and thus slowing activity. Factoring comes in handy when business is slow since the finances will help you run the venture as usual.
It is easy to use factoring as it is more flexible than other ways of getting finances. You, however, need to have clients who can pay up. If you have other problems other than slow-paying customers, then factoring is not the best option.