Financing a new business is a tricky situation, and it can often be difficult to find the money. Very few people entirely self-fund their business (although it is possible as we’ll discuss later). So, with this in mind, you need to know all the different options available to you.
Business loan
Business loans from a high street bank are the most common way of securing funding for a business. However, saying this, they’re still not easy to obtain. As the bank is offering their own money, and thus risking their capital, they often require large volumes of information.
Before you approach a bank, you should come up with a detailed business plan. This can then be used to persuade them of the validity of the business idea. This should also include detailed descriptions of costs, predicted revenues, other investments and so on. If your figures don’t add up, the bank won’t invest, so spend time on them.
Self-financing
As stated, some people do manage to self-finance their business. This, however, depends on that nature of the business itself. It’s usually only doable if the business can be run from home with very low levels of stock and space required.
If, for example, you require machinery and a large warehouse space, this is much harder to achieve because of the large overheads. Your other option is to save for years on end to fund your first year. However, your business opportunity may pass you by if this is the case.
Secure an alternate loan
If you can’t secure a bank loan, then other options, such as guarantor loans are available (learn more about these here). This is ideal if you have a poor credit rating and struggle to get credit on your own. As a form of unsecured loan, the borrower simply has a second person acting as a guarantor.
Crowdfunding
Finally, in the last few years, crowdfunding sites such as Kickstarter have become popular for projects and businesses to gather funding. Here, individuals can make pledges to help get your business off the ground.
Again, like self-financing, this is most doable if your business is small, or you need help funding something specific, like a new piece of equipment, or to test some new technology. It’s unreliable, but it’s always worth a try. Someone may love your idea.
There are various ways that you can fund your business, but some may or may not be right for you. Research all of your options thoroughly before deciding what’s best.
