“Making money is art and working is an art and good business is the best art.”
Starting a business is surely a dream of many. As per the census, around 4.3 million business applications have been submitted in 2020. Initiating a business of your own may seem exciting and adventurous, but it isn’t always the same. Hardly a few survive after running for roughly 4-5 years. Do you know why? – Because business making is an art. The funding is crucial to get business off the ground, and a lack of sufficient money can bring down your business instantly. But, do not despair! Here in this blog, we will explain how to get money to start a business.
Let’s explore the following ways to get money for starting a business.
Using your personal savings for setting up a business is a common practice followed by many entrepreneurs. These won’t drain all your money unless you have proper planning. Keep aside some of your savings for your daily expenses to survive for at least a year until your business takes off successfully. As per SBA, you can decrease your credit card debts to save more for your business expenses. Moreover, setting up an automatic deduction to your savings bank account, getting rid of unnecessary expenses, or buying used material can even work out in saving extra bucks as well.
Well, opting for bank loans is one of the most trusted options one would ever look for before investing in a business. But the problem arises when you find that not many banks are not really up for lending money for small business ventures. They only approve a loan when you can show excellent credit scores or business plans to them. They may even ask you to invest money to ensure your commitment to your business. But there’s one way out, you can reach out to your bank or an SBA-guaranteed lender.
Borrowing money for a new business set-up, from friends or family is the most old-school technique that has ever existed. You need to be tactful and put the terms in writing to avoid hurting the feelings of anybody. You can even opt for personal loans from banks which is probably the most viable option if you require relatively small startup capital.
You can go for business credit cards unless they have lesser interest rates. Ensure you choose the rightful option with excellent repayment terms and with low-interest rates, as you don’t wanna cripple your business within months of opening it.
Thankfully SBA has offices around the US and provides numerous grants that one can avail to get money for their start-ups. Research a bit and figure out your barriers to finding the appropriate government grants for your business. To mention a few,
- Grants for women who are socially and economically disadvantaged.
- Small business grants for veterans
- Small business grants for minorities
There are other states or regional grants available from where you can make free money to start a small business.
There are quite a few large companies that perform philanthropic activities to support budding entrepreneurs with corporate grants. Some offer to non-profit companies while others to for-profit organizations. It can be through contests or a program offering affordable loans at a very low-interest rate.
These P2P lending options are one of the great ways to get money to start a business. Individual investors lend money through online P2P platforms. All you need to do is post your requirement on platforms like Lending Club or Prosper, and prospective lenders or investors will review and approve your request if found suitable. The flexible and lower interest rates, besides fewer fees, make it an effective way to arrange money for your new venture.
Investing in startup ventures is not everybody’s cup of tea. But there are quite a few individual investors who take an equity stake in the new business and help your business to get off the ground. Moreover, they even assist and guide the budding entrepreneurs with their experience and expertise. They help open doors for your new venture by providing you with contacts for an easy move.
Venture Capital firms are even helpful as they make direct investments in exchange for equity stakes in your business. Most of the VCs work in partnership and invest in businesses that are already established and generating good profit. Moreover, they hold managerial control of the business and hence, might not always be suitable for entrepreneurs. They provide investment through the SBIC program in three forms:
- Loans and Equity
Crowdfunding and Crowdlending:
It is the newest and trendiest option for entrepreneurs to get money to start a business. It involves asking a large group of people or dedicated websites to invest in your business, and in turn, you offer them your product as a gift. Whereas, in the case of crowdlending, you request investment from investors and ensure that you would pay them back the money after a certain period. Some of the popular crowdfunding platforms are:
Okay, so now time for some quick Q&A:
According to Forbes, certain parameters decide whether a small business owner is eligible for a business loan or not. Those are:
1. Good credit score
2. Enough cash balance to settle the outstanding loan amount.
3. An accurate financial statement stating your assets and liabilities, income, and other details.
As per SBA, a home-based business run by one owner generally requires around $1000-$5000 as start-up capital.
Yes, why not! Below are the following options to opt for, if you have no or little startup capital:
2. Service-based business
4. Digital products
Unless you have enough funds or are a millionaire, you need to count on all the funding sources and weigh their benefits and downsides to decide the most feasible option for you. Mix and match the multiple sources and do have a solid contingency plan in hand to extract more money for your new venture.