Is your mind-boggling with a big, bang-on business idea? But how do you plan to bring it to life? Have you got your finances sorted out? With thousands of businesses all over the world operating in different fields, we all know that all these businesses have to raise money for financing the company.
Looking for finances in any economy of the world can be a little frustrating. Even if you are just a startup, seeking capital to expand your business or needing money to save your business from jeopardizing, the struggle is the real one. It is an obstacle that every entrepreneur, big or small, has to go through. So what can you do about it?
Every entrepreneur needs to look out for financing options to fund the business. Luckily, we have designed a guide for you, where you will learn about various financing options for you to get the money your business needs to run or establish. Here seven guidelines that are worth going through.
Start with bootstrapping
Rather than digging the mines outside your territory, why not consider using what you already have with you, maybe you have a hidden treasure buried in your own home. Bootstrapping simply means tying your business together by looking for funds in your own home. It mainly includes any home equity lines you may have, your credit cards, and savings accounts.
This method is considered as a reasonable approach since you don’t have to raise or borrow money, nor would you have to return any hefty loans along with interests or give off any monthly payments. Some entrepreneurs continue with this approach until their business turns profitable.
Slow and steady wins the race. However, if you plan on establishing your business faster, then you can consider external funding sources. Moreover, consider doing an MBA in finance online, this will polish your skillset and give you the ins and outs on better managing the finances.
Friends and Family
If bootstrapping didn’t give you any help, try looking for internal finances externally. Makes sense? It may sound a bit daunting, but getting someone from your friends or family to fill for you is a better idea. It won’t hurt you to ask. You probably have a family or friends as rich as Richie Rich to lend you a few grand if you impress them.
The trick is before you just go out, begging for money, be professional, have a strong business plan in hand. It will help you better explain the thoughts and vision of your business. This will also help them trust you better.
The old-fashioned business loans
This is one of the most common and traditional ways to finance your business. You need to setup a meeting with your local bank and convince them to lend you a loan.
As easy as it may seem, it’s not, but at the same time, it also is not impossible. All you need is good convincing skills and a strong business plan. Try opting for a lender in a bank you usually visit; it is rather easier to convince them since they know who you are. Nonetheless, there is no harm in exploring more options.
If you are someone who never even heard about the term business loan, no need to panic. You have to fill out a simple form, provide the relevant documents, submit the business plan, and you are good to go. The approval could take weeks or months, so it is better to apply beforehand.
It is a good strategy to opt for. You will have access to markets and new products; you can overcome your competitor and increase customer loyalty. All you need is a list of customers’ pain points and a good partner to help you solve those problems.
These private partners are also known as Angel Investors, who are private individuals or small group executives who look to invest in businesses, usually via the purchase of equity.
However, it is not easy to please them since they invest based on the potential growth of the business and an exit strategy (liquidity).
Purchase order funding
This type of funding is growing popular in the business world. Purchase order fundingsare specialized and help businesses by purchasing the goods of a company on the markup for those who need to pay their suppliers. The purchase order funding would directly be paid to your supplier, which would allow you to fulfill your large orders.
If you are a small startup that has been given a large order, but you don’t have enough funding to fulfill the requirements, then this sort of financing is right for you.
If your business is going through cash flow problems, the factoring method is a go-to method for you. Factoring, however, works with government or commercial clients having good credit. If used correctly, you would be able to improve your cash flows as well as gain more potential clients.
It is not a practical approach but can come in handy. You would be allowed to start your own campaign on websites like Kickstarter, set your financing goal, and offer some small rewards to the people who fund you.
A mistake entrepreneurs usually make is that they fail to explore all the options around them and end up honing a single financing option. You would be spending all your energy and time in one place without little or no luck. If you do keep a lookout, you might find something that suits you best.