When you have a great business idea that you are eager to move forward with, there will be many things to consider, such as getting estimates for various expenses, preparing initial operating budgets and making marketing plans to launch your business. However, before you can get your business up and running, you will need to money to fund your business.
There are few options available to get your business idea off the ground.
Friends and Family
Many entrepreneurs find they have to self-fund their business at the start. This can be done through savings, leveraging personal assets or borrowing from friends and family. This proves to other potential investors that the business is viable, that you have some experience in running the business, but also that you have faith in the business and have put your money where your mouth is! Although borrowing from friends and family may seem like an easy option at first, you are risking your personal relationships if the business does not work out or the financial agreement is unclear. Approach this form of funding like you would any other form: produce a business plan, explain exactly what the money will be used for, what the investor can expect to get in return and when they can expect it. As well as putting investors at ease, it will also clarify your own goals and objectives.
After the initial self-funding, many business owners will seek to develop and grow their business by seeking funding from outside sources.
Seek Investors
One popular option is to seek investors for your business. Investors may be silent partners who simply contribute cash in return for a percentage of profits, or they may be active partners who play a key role in the daily activities and business decisions. Some silent investors may remain in a partnership with you until they have received a certain return on their investment, or there may be some other exit strategy in place. You may know individuals who you can approach about partnering or investing with you, or if not, you can look online for information about potential investors who are looking for opportunities.
Apply For Financing
Another option is to apply for a bank loan. There is a wide range available, and you can use an online calculator tool to determine which options are the most affordable for your budget. The right loan program will have attractive repayment terms and a great interest rate, but it also will provide you with all of the capital that you need to fund your operation until it begins to turn a profit. This could take several months or longer, so you may consider creating a budget that details expenses between and the projected breakeven point or beyond.
Each funding path will have its own advantages and drawbacks, so ensure the one you choose fits in with your business needs and allows you to focus on the most important task – running a successful business.
Joe is a former financial advisor and media representative for American Express and Ameriprise. He was the “Money Man” at Detroit television WXYZ-TV, appearing twice weekly. He’s also appeared in Bride, Best Life, and Child magazines, the Los Angeles Times, Chicago Sun-Times, Detroit News and Baltimore Sun newspapers and numerous other media outlets. Joe holds B.A Degrees from The Citadel and Michigan State University.
Leave a Reply