Starting a new business is an exciting prospect. However, one of your main concerns may be how you are going to finance your potential plans. There are many ways in which you can do so, meaning the decision you make will stem from a great deal of planning and careful consideration.

How to Finance Your Business

Image Source: Pixabay

The only way in which you can foresee the growth of a business is with the correct funding. Therefore, it is wise to look over a handful of options to see what would be best suited to your situation.

If you are looking to start a new business, but you’re unsure of how you are going to finance it, here are a few options that may be worth considering.

1. Small Business Loan

It is not unusual for a new business to get a bit of help when it comes to starting up. In the early stages, you may find there are many initial costs involved, meaning taking on a small loan may be a suitable option.

Small businesses can get access to lenders through the Small Business Administration. This platform will provide information on some reputable lenders.

If you are looking to lend $35,000 or under to get your business off the ground, you may opt to take out a microloan. This type allows money borrowed to be paid back over a very reasonable six-year period.

2. Funding Request

If you believe your business fills a gap in the market and has the potential to earn a significant amount of profit, it may be worth applying for funding request from investors.

Within your business plan, you will need to state the amount of funding needed and any other expenses over the next five years or so.

Ensure you state the type of funding you are hoping for, what you plan on spending the funding on and your plans for growth in the near future.

3. Stocks

If you would prefer to fund your business independently, a good way of building up a lump sum of cash would be to invest in stocks.

While many stocks require the investor to lock away their money for a long period, short stocks are ideal for individuals who wish to make an investment but can access their potential profits quickly.

Those who invest in stocks to short base their earnings on the hope that the price reduces on the stocks they have sold, with the intention of purchasing them back for a lower price; resulting in a substantial profit.

Making an investment such as this would be ideal for securing some passive income without taking too much of a risk or damaging your business prospects. If you are looking to find out more information about such investments, this advice should be able to answer all of your questions.

4. Credit Cards

Credit cards are another popular way of financing a business, as well as increasing cash flow. Taking out this small personal loan would be a good way of paying your suppliers instantly, without having to wait for a loan to be accepted.

There are also added benefits of using credit cards, such as earning rewards and having a greater element of protection.

You may have a few small expenses to pay out to get our business up and running, which could ideally be paid with a credit card.

However, ensuring all debts are paid off on the set date is essential, or you may find yourself in a financial mess.

Be aware that the way in which you manage your credit card payments does affect your personal credit score which can be a significant downside.

5. Become an Air BNB Host

Many individuals are now choosing to rent out rooms in their home, should they have extra space to accommodate guests.

Becoming an Airbnb host means you can earn some passive income to finance your business and has been proven to offer greater rewards than if you were to let out the whole of your property at a monthly rate.

Airbnb is charged on a nightly basis, though, the success of your property all depends on target market and location.

6. Ask for The Help Of Friends And Family

Many potential business owners often ask for the financial help of close friends and relatives who have a bit of cash to spare. You could ask whether they would like to make an equity investment; in which you will be expected to sell a part of the company to them and they will then take a proportion of profits. Or, you may ask whether they would be willing to lend you a small business loan.

Again, while this may sound like a reasonable option, business and personal relationships don’t always go hand-in-hand. If your business doesn’t work out and their money is lost, you could risk damaging your relationships.

You need to ask yourself whether your business means more to you than these relationships to make this option a feasible one.

Another downside to this potential financial plan is that you will be gaining a partner to the business, which may never have been your initial consideration.

While investors are simply ‘sleeping partners’, there are occasions when they may wish to voice their own opinions and overrule your judgments.

If you still wish to go down this route, it would be wise to write out a contract that pinpoints every single risk the business may face, so they know exactly what is involved before handing out cash.

7. Angel Investors

If you would prefer to leave personal relationships out of your business plans, you may wish to seek the assistance of Angel Investors.

Individuals or small parties who are experts in business investments will make an equity purchase if they believe your business has the capability of success. Not only can you gain financially from their investment, but they will also provide you with any advice and guidance for future expansion.

Similar to other options mentioned, getting the support from an angel investor isn’t the easiest choice. You will need to present a solid business plan, and an exit strategy should anything go wrong.

Angel investors are keen to know how they can take away any profits and recover their initial investment to avoid being left short.