Maybe you have a great idea for a new small business that you think would be a fantastic success. But there is one problem: money. Starting a company requires initial costs for all kinds of things, from merchandise to marketing. If you aren’t quite sure how you’re going to raise enough funds to make your dream a reality, then consider the following ways to finance your small business.
A Small Business Loan
Your first option is a small business loan. There are several varieties of these. You might work through the Small Business Administration and apply for funding there. But also be aware of other loan options. If you’re a veteran, for instance, you may be able to get special rates and easy application on convenient veteran business loans. Women business owners may also qualify for loans geared directly toward their enterprises.
Always be fully aware of the terms of your loan. Read through all the fine print, and ask questions about anything you don’t understand. You should know exactly what your interest rates, due dates and payments are. There’s always a level of risk in a loan, but it could be a great option to help you get your business off the ground.
In some circumstances, you may be able to apply for a grant to help you start your small business. Check with your city, county and state for options. You may also be able to apply through the USDA Rural Business Development Grants program if you live in a rural area. Or your region may have a Small Business Development Center. Even private companies sometimes offer grants. These tend to be quite competitive, however.
Whenever you’re filling out a grant application, pay attention to details. You should have all your facts and figures firmly in place. Your budget must be thorough, and you should have a full business plan that you can share with the granting organization. If you don’t feel comfortable writing a grant application, turn to someone in your local community who has experience with the language required by grants.
Perhaps you have a savings account that can fund at least part of your business start-up costs. This may be a good option if your business doesn’t require too much in the way of inventory. You may be providing services out of your home, for example, and only need money to market and perhaps buy a couple pieces of equipment. In that case, you could draw on your current savings.
Keep close track of every dollar you remove from your savings, and pay it back when you can. Consider it a temporary loan from yourself to your business. As your company grows, you may even be able to add some interest to your “loan” payments.
Depending on the nature and scope of your business, you might be able to gather a group of investors to help with funding. This could be an informal collection of friends and family members who chip in a bit to help you get started. Or you could be more formal and register your business as an actual corporation that can support investors. If you decide on the latter, work with a business consultant who has experience in corporations and can advise you properly about corporate law, accounting and recording keeping.
Even if you choose the more informal method of investment, you should treat this part of your business with utmost seriousness. Your investors are entrusting their hard-earned money to you, so keep careful records about how much each one has contributed and how much is due back. You should also consider drawing up a formal document for each investor so that your agreement is in writing and you both know exactly what to expect.
Getting a new business off the ground isn’t easy, and it can take a significant amount of money. So consider these funding possibilities, and get ready to pursue your dreams.