Many people dream of becoming entrepreneurs. However, being an entrepreneur is not short of risks. If you want to start your own business, you must be prepared to take risks. The risk factor notwithstanding, the primary factor in a business is capital. Besides that, it helps to have tools like an Invoicing Software to make your business more efficient.
Procuring sufficient, required capital is a herculean task which demands a great deal of labor. You need to analyze and tap into your resources. Here are a few ways in which you can raise funds to start a small business.
Self-financed start-ups have their ups and downs. Though it is easier to procure funds, in case the venture does not work out, you are left holding an empty bag. But for those entrepreneurs who want slow and steady progress, this option is the best. There are a number of ways in which you can self-finance your business.
Tapping into your personal savings is the first option that many entrepreneurs look at. It doesn’t matter where your savings come from, whether it is a savings account or some term deposits or inheritance. A personal investment displays the entrepreneur’s commitment and encourages other investors to pitch in.
Cash in Your Assets
Selling off assets like shares, bonds, estate, family heirlooms will help raise funds for your business. You need to keep in mind that while selling certain assets like estate and stocks, tax implications are involved.
Cashing in on your credit cards is a quick and easy way of raising funds. But remember, credit cards come with a heavy interest rate, especially if you miss a payment.
Borrow Against Property
Borrowing against the equity in the property that you own, like your home, is another convenient way of raising funds.
Taking loans from banks is a common way of procuring capital for your business. Bank loans offer lower rates of interest than credit cards but it can be a little difficult to obtain these if you have no collateral and live in the UK. The financial experts at Lucky Loans explain that bank loans are a good way to get a business started if you choose the right type that matches your needs. Different financial institutions offer a lot of long and short-term loans for different purposes.
Tap Your Retirement Accounts
Companies and organizations have many retirement benefits for their employees. Withdrawal from some of these accounts can give you the capital required for your start-up. The only drawback is that in some cases, these withdrawals might come with severe penalties.
Family and Friends
In case you are unable to raise enough capital yourself, borrowing from family and friends can be considered next. Borrowing from friends and family is easier than bank loans. The interest rates will not be so high and the repayment terms are not so stringent.
Of course, this also has its flip side. If you are unable to repay the bank loans, your credit score goes down and you may have to face litigation. But if you are unable to repay loans from friends and family, your relationship score goes down. Your relationship might stand the test of time but not the test of money. So think before you tap your loved ones for loans.
Many big, well-established companies invest in start-ups against equity shares. These direct investments help in raising the capital necessary for starting a business.
Since the internet is being used by entrepreneurs for their business, why not use it for financing your business as well. The internet can be used to draw potential investors to pour finances into your enterprise. In fact, nowadays, there are special sites meant for the sole purpose of crowdfunding. Some of the platforms need the entrepreneurs to specify a certain amount as a goal. In case the goal is not met, the collections are returned to the donors. A certain percentage of the funds are also kept by the crowdfunding platforms.
Peer to Peer Loans
A peer to peer (P2P) loan works very much like any other P2P transaction. There are no middlemen between the borrower and the lender. A borrower puts up a request for the required amount with the reason on a P2P platform. Potential investors analyze the request and disburse loans of varying amounts depending upon their capacity and interest. Once the entire loan amount is collected, it is transferred to the borrower. The borrower then returns the amount borrowed as per the decided terms and conditions.
Like any other venture, getting together the required capital for your start-up needs a lot of effort and meticulous planning. You need to consider the pros and cons of every option before finally deciding as to which source to tap into. You might have to tap several sources together, say a little amount through self-finance, and some through friends. It is necessary to plan systematically, think logically, analyze carefully, and only then come to a decision. So go ahead and tap your sources and watch your business touch the skies!