Starting a new business can be a daunting task, but it is not impossible. Think of all those courageous men and women who started their businesses from scratch. They chased their dream and were persistent. Did you know that every year thousands of people start their ventures?
Their business nature might be different, but all of these people had one thing in common – they needed financing for their business.
Here’s an article that covers all the basics you need to know about financing a business. This is for both small and big businesses!
Equity Vs. Debt
Let’s put this in simple words for your understanding –
Equity is when you sell an equity stake (a part of your new business). In this case, there is no pressure of paying back because the rightful owner of the equity gains access to cash flow and other benefits.
Everyone is aware of what debt means. It is a loan taken from a bank or an entity. But, this money has to be repaid within a stipulated timeframe. In case you do not pay the debt in time, the lender has the power to take all your assets away.
These were the two ways of financing a business. But, it could also be a mix of the two.
As we move forward, let’s understand the actual ways through which you can start your business. A business requires grand ideas, actions, manpower, a great leader, resources, and MONEY!
Use Your Savings
The best way to finance your business is to utilize your savings. This way, you do not have to return anything! It is good to save some money every month. Some people use insurance money, retirement money, and others might even sell their assets to achieve their goals.
If you have time to save for your new business (a couple of years), then start right now. Every penny counts!
In case you don’t have time (or money) to finance your business, move to the next section.
Opt For Business Loans
Many banks provide a loan to new business owners. Let’s face it: money is required for a lot of things. You would need financial support in the beginning. Make a business plan and figure out how much money you need for your business.
Let’s take the example of truck drivers. You decided to start your own business of truck driving and need a loan to achieve your goal. For commercial truck loans, you can reach out to the commercial truck financing market. They offer both lease and loan options.
A no money down loan or lease is the right choice for prospective truck business owners. You don’t have to pay a penny down upfront.
Credit Cards To The Rescue
Credit cards might not be the most favorable option. Why is that so? Well, you can use your credit card to pay the suppliers, but these cards are tied to your credit score. What if you are not able to pay the credit card bills?
If you have decided to use your credit card, make sure the usage is wise. After all, you have to maintain a good credit score.
Reach Out To Friends and Family
Your family will abide by you through thick and thin. You are aware of that, right?
Reach out to them and ask for some financial help. You can pay them back when your business starts running smoothly.
This way, you have no pressure to return the money immediately.
You can also reach out to angel investors. If your business has potential, they will let you know. Moreover, they can guide you about how you can improve your business plan.
So, chin up and find the right way to finance your business. But, be very careful about the choice you make. You should be able to pay back the money and read all the terms and conditions laid down by the lender.
We truly hope your business reaches new heights!