How to Fund a Business
If you’re thinking about starting your own business, you’ll need to acquire the necessary capital to turn your vision of a profitable venture into a reality. Whether it’s a brick-and-mortar store, online shop, or business-to-business (B2B) service, you’ll need at least some money to get running. So naturally the question remains, how to fund a business?
How to Fund a Business
Before you even think of trying to acquire funding for your business, you should first create a business plan. This formal statement should contain your business’s goals, objectives, plans, and background data. The general idea behind a business plan is to provide lenders with a map of how to intend to make your business profitable. Banks are often hesitant to loan money without some proof that the business will succeed — and that’s where a business plan comes into play.
Personal Cash and Credit
Of course, one way to fund your business is to use your own personal cash and credit. If you’ve saved up a “nest egg” over the years, perhaps you could dip into it. And once your business is profitable, you can always repay yourself. There are a few problems with this option, however. For starters, there’s no guarantee that your business will be profitable. If your business fails and you use your own personal credit, it will hurt your credit score while placing your assets in jeopardy.
Small Business Loans
Another funding solution is a small business loan. These loans are intended specifically for small businesses, with banks and other financial lenders handing them out to suitable candidates. Again, though, not every business owner who applies for a small business loan will be eligible. Banks scrutinize the business’s history and predicted growth to determine whether or not they are a good candidate.
Angel Investors or Venture Capital
A third funding option for small businesses is angel investors or venture capital. If you’ve ever watched the ABC TV show Shark Tank, you’re probably familiar with angel investors. Basically, angels are people who invest in startup businesses, providing capital in exchange for partial ownership. This is in stark contrast to traditional banks and lenders, most of whom provide capital with interest. Furthermore, angel investors bring real value to the table, assisting the business owner in getting his or her business up and running. After all, it’s in the angel’s best interest to help the business succeed since they own part of it.