Essential strategies for financing your business

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Whether starting up a new business, or searching for ways to bring extra finance into an existing company, there are a number of ways to generate additional funds. What will suit one company may not be appropriate for another, so below we take a look at some of the most popular – and accessible – options available to you today.  

Self-financing

One of the most common methods used when self-financing a business is to take out a home equity loan on part of the mortgage that’s already been paid off. In return you’ll be given access to a new line of credit or a lump-sum loan payment. Also review the assets available to you, from savings and retirement accounts, to any real estate or vehicles you own that could be sold to generate the finance your business requires.

Short-term loan

Taking out a short term loan offers a quick solution to starting up a new business. Once you apply the decision is typically made very quickly and you can have the funds available within 24 to 48 hours in some cases. The loan can be repaid over a fixed period of time so before committing be sure you have the resources to stick to the plan without defaulting. Also ensure the borrower is FCA registered.

Crowdfunding

Crowdfunding has become a popular choice over the past five years with businesses in a variety of sectors using this route to finance their needs. Using sites like Kickstarter enables you to create a campaign with in-built finance goals that offer rewards to those who donate. As long as people receive their rewards and the money is used for what it was intended for, you won’t have to pay a penny back.

Generate presales

Also known as presale financing, this method involves generating funds by securing orders of products or service from customers before they are officially made available. It can remove the need for the company to take on extra debt as the money can be immediately reinvested back into the business. However, before using this option be sure that the product or service is fully developed so once given to the customer it will perform as advertised. Otherwise it could do irreparable damage to the brand.  

Friends and family

Some may prefer to keep their personal and business lives separate, which is completely understandable. Although relying on friends and family to loan funds for your business is usually a less pressurised alternative to taking out a bank loan. If you choose to use this option, be sure to have a clear strategy and repayment plan in place you can keep to, otherwise it could place unnecessary strain on the relationship.

Angel Investors

Using an angel investor offers access not only to much needed funding but also business acumen. They may expect quite high returns as a result, so be sure these can be achieved in the agreed time frame before making a commitment. A venture capitalist could also be an option worth considering, although they will not take such a hands-on role with their investment compared to an angel.