Many people give up their business ideas before they have even started, mostly due to a lack of funds and the daunting prospect of trying to find an institution willing to finance the idea. This article examines some practical ideas of where to find the extra funds in order to start your own business.
There are three possible sources of funding to start: applying for a loan, raising the capital yourself, or saving up before launching the business.
Bank Loans for Small Businesses
Banks are more inclined to lend to small business owners who have demonstrated faith in their business by investing some money of their own into the business. A bank will generally ask for collateral or security, which could include assets like your house.
Raise Capital to Invest
Thousands of successful small businesses have started as a hobby or a “second job,” while the individual's current job remains the primary income source. Many doing this opt to stay with their job until the small business becomes established and starts to become successful.
Others raise capital themselves any way they can by temporarily down-scaling, renting out part of their house, selling assets, and so on.
Another option is to borrow capital from family or friends in order to start up. The arrangement for this will obviously vary, and the risk is that personal relationships may be permanently damaged if repayments cannot be met.
Raising funds through an angel investor has provided many small business owners the capital they need to successfully launch the business. An angel investor will typically need a solid business plan. They will likely want to see what your small business market research strategy.
Capital can also be raised by means of government grants.
Saving to Start a New Business
This can be a lengthy process and may take patience before enough capital is raised. Some invest in a fixed deposit at a bank or try to get better returns by investing on the stock market (which can be risky). Be sure to outline your goals to a financial planner if you are not sure where to invest for the best returns.
Tips on Starting Your Own Business
Turning an idea into a successful business often means being prepared to work extremely long hours for no rewards in the beginning. Keep motivated and persevere by making time sacrifices and being disciplined and organised. During the start-up phases, a small business owner generally needs once-off start-up costs as well as around six months of working capital.
Make saving a habit and remind yourself of your goals regularly.
Look at the articles How to get a Small Business Loan and Small Business Loans for Women for additional information on raising funds.
Fleur Hupston - Fleur Hupston is a professional freelance writer based in Botswana, Southern Africa. From this unique perspective, she writes travel ...
Join the Conversation