Every time I run into an old acquaintance or even look on social media, I see someone else who has decided to start a business. There are around 1 million people every year who decide to take their skills, talents, and passions and jump into the scary world of entrepreneurship.
If you find yourself becoming a part-time or full-time business owner, you may find yourself in need of financing.
The Necessity of Financing Your Startup
Not everyone who starts a business will need to raise a lot of capital before getting started. For some, the nature & structure of the business will mean that little investment is needed – many people are able to “set up shop” virtually and use profits to fuel growth.
However, many will need to raise a significant amount of money before being able to sell their goods or services. There are a lot of things to consider when it comes to starting a business – legal matters (licensing, registration, permits, etc.), advertising, inventory, salaries, lease costs, taxes, insurance, customer service, online presence, and many other things that may be specific to your industry – and many of those things will require a serious investment in order to set them up properly.
Even though it’s up to you to determine how much and how early you will need to invest, allow me to give a word of advice: Don’t go the cheap route on things that can save time or money in the long run! You want to set your business up properly, legally, and efficiently, and while you may be able to cut costs here and there, being too “cheap” in these areas will only lead to regret down the road.
The Struggles of Financing Your Startup
Even though you may have a great vision for your business, not having the capital needed to get if off the ground can stop you in your tracks! There are a few ways to get the money you need that will require some patience and sacrifice. You could:
Work for It
If you are able, a second job is a great way to build up the funds you’ll need to get your business off the ground. This is a huge sacrifice if you have a family, and it will draw you away from the time you are spending on business planning. If you are able to juggle your responsibilities, the short-term job could get you on your feet faster.
Ask for Help
Getting investors on board with your vision saves on the stress of a second job, but can be difficult for those who don’t necessarily like selling themselves. In the last few years, sites like Go Fund Me and kickstarter have been really popular for different projects.
Also, the people who know you best may be the ones who are most financially supportive in getting your business off the ground because they already know and trust you and believe in what you are doing.
Borrow the Money
On top of trying to seek out investors who would take a stake in the company in return for seed money, you can also look for banks, companies, or individuals who are willing to simply loan you to money in return for a set interest rate.
Lending Club and Prosper are two services that link up borrowers with investors (they are investing in the loan, not your business), offering lower borrowing rates by cutting out some of the overhead needed by traditional banks. Many people may choose to borrow the money to finance their startup by using credit cards. According to the Small Business Association, over 65% of small businesses use credit cards on a frequent basis!
A major difference between getting an investor and simply borrowing money is that the one who loans you the money usually expects repayment to start within a month or two of the loan; whereas, an investor is usually willing to wait for multiple years before expecting a return on their investment.
Sell Your Valuables
Another option is to sell things you have to get the money you need for your endeavor. A lot of us have items that are of value to someone else that we would gladly part with in order to start a business. It’s time to let some of those things go!
We may not always want to part with expensive items or with belongings that could be considered “status symbols”, but when it comes to being able to finance your business it still may be worth it to sell your watch, to avoid paying interest or having to share your profits with someone else down the line.
Remember, you aren’t trying to find a way to make sustainable income in this stage – that’s the purpose of the business, right? – you are just trying to find a way to get your business off of the ground. In those situations, you have to ask yourself if you’d rather have that item or a business that has a good foundation and is growing.