You have a great idea for a new business, and now you want to turn your plans into reality. But you need more than enthusiasm and dedication to get it up and running: you also need funding.
So how should you go about funding your new business?
There are many options to consider, and here are some of the best that you might want to look into.
Friends and Family
There are many ways to fund your new business, but perhaps it should be no surprise that the first place many entrepreneurs turn to is their friends and family.
Getting a loan can be tricky for a new business. When you borrow from people you know, you may find it easier to get the funds, as well as being quicker and cheaper.
However, always take it seriously and write down the details of the loan. And be aware that if you cannot pay them back, this could seriously harm your relationships.
Savings and Credit Cards
Another common source of funding is your own savings account. If you have some money tucked away, this could be the best option for you because there are no interest fees or any consequences if you fail to pay it back on time.
Or you could turn to your credit cards or your bank overdraft like many entrepreneurs do at the beginning. These are all sources of funding, and while they may not be ideal, and although they can be very expensive if you only need a small amount of funding they can often be the most convenient option.
Next up, you might want to look into taking out a business loan, and one of the first places that you might look is your bank.
Banks do provide business loans, but they may be reluctant to lend to a new business owner with a dream. They prefer to lend to people with a good track record, and they are also likely to want your loan to be secured by your assets.
Another option is to get a loan from a specialist lender. These are not banks, and it may be easier to get a loan this way. But again, many lenders will want to secure the loan.
If you can find an unsecured loan, this may be a useful option. Companies like Unsecured Capital can provide these, and reputable lenders might also make it easy to borrow money by providing an online application and a same-day approval process.
If you are serious about getting funding, you might want to attract an angel investor. These are affluent investors who will want to hear your pitch and then decide whether to invest or not. If they like what they see, they might offer you funding in return for a stake in the business.
If you go down this route, make sure you do your sums. You will need to show that your business is going to be successful, and you can’t often get away with presenting an idea and nothing more.
A newer option is crowdfunding. Sites like Indiegogo and Kickstarter have become popular sources of funding for many new businesses. Some businesses have experienced incredible success using these platforms.
The process involves presenting your idea and then asking for funding from users of the site. People can give you donations ranging from small contributions up to larger amounts, and you typically offer to provide an award depending on the size of the donation.
For example, in response to a donation, someone might be able to get onto the list to be the first to get their hands on your product.
It’s not the right option for every business, but it can be a useful way to get funding if you have a unique and intriguing idea.
Line of Credit
A line of credit might be another option to consider. This is where you are given a certain amount of money to borrow, but you do not borrow it all at the same time.
Instead, you withdraw funds only when you need them, and you only pay interest on what you actually borrow rather than on the full amount.
These are more common for businesses with a longer track record, but they can be a great option if you can get them.
Get the Funding You Need
Getting a business off the ground can be tough, and you will almost certainly need funding to help you. But even if you’re having difficulty doing this, don’t despair. There are many options to consider, including the above ideas, so have a think about which might be the best option for you.
Then start putting serious effort into raising the money you need, and soon you might be able to secure funding so you can turn your business idea into a reality.
About the author
Lara Bray writes about business topics, usually focusing on the needs of startups. She works as part of a team of business consultants in Chicago.