Funding Your New Business

One of the biggest challenges for entrepreneurs launching a new business is obtaining the cash they need to launch and get their startup off the ground. New entrepreneurs also often underestimate is the amount of money (or resourcefulness) required to get their business noticed in such a competitive landscape.

That said, there are a number of ways you can reduce the amount of upfront capital you require, as an example, you could outsource tasks such as Preventive maintenance of vital equipment to an external company that charges you on a more flexible basis than having your own maintenance department… or find ways to bootstrap your business like many solopreneurs have to in the early days.  

Indeed, many successful businesses started out with very little capital, and as a result, this has conditioned them to become more resourceful and frugal in the management of their finances.

Raising capital is rarely an easy task, and for many entrepreneurs, it can be a scary process – going before a panel of investors and being grilled about their business, for example… or even securing a business loan on their house, whilst it circumvents the need to “sing for their supper” in the sense of convincing investors – it now makes their world very unstable, given that they now have the security of their own home riding on their business being a success.

Entrepreneurs can face immense emotional pressure and work very long hours; all the time knowing the odds are heavily stacked against them… but that’s what makes an entrepreneur an entrepreneur is their determined spirit; they are risk takers, they are modern-day explorers and voyagers found in ancient times; setting off on journeys into stormy and perilous seas in pursuit of discovering great new riches.

However, without capital behind them, the chances of them even getting out the harbour are incredibly slim.  This article offers three suggestions to think about when raising capital:

GET A BUSINESS LOAN

The most traditional route for setting up a small business is to get a small business loan, and this is a particularly viable option if you were to look into buying a business as an alternative to starting from scratch.

Getting a business loan is one of the easiest, reliable, and certain ways of financing your business presuming you have decent credit; though banks will often look to secure this loan on an asset such as your home.  The benefit, however, is that you keep complete control of your company, as you aren’t having to offer equity to external investors, who each get a say in how your company is run – and convincing one person, is a whole lot easier than going around investor meetings.

FRIENDS AND FAMILY

If you have a wealthy relative, or several friends and family who are open to backing your business for a small incentive (such as interest on the loan) then this can be a great option, as it will cost less and be easier to arrange than commercial financing; however, borrowing money from friends and family can be a very stressful experience that totally changes (and sometimes annihilates) friendships.  It might be worth considering the potential strain put on your friendships should the business not turn out to be a success.

CROWDFUNDING

A recent trend in raising startup capital is that of crowdfunding; where you pitch your idea on an online platform such as www.crowdfunding.com and strangers can offer bits of cash to back your idea – but these ‘bits of cash’ can accumulate to several million dollars.

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