How to finance your start up business

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Immediately [1] throwing up every dollars when starting your business is not a good strategy; it isn’t so simple like that. This is true to all start-up businesses in terms of financing. Getting money from different sources makes your business have its needed capital and development in the long run.

Yes, banks exist, but they’re not the only source of funding that you can count on. By showing them how proactive you are as an entrepreneur, banks will often give you a better chance of borrowing money from them.

There are a lot of cash flow an entrepreneur can rely upon, but he/she should keep in mind that each of them has its own advantages and disadvantages, and ignoring these facts can ruin a start-up business even before it has started.

Personal Investment

When you start your business, the first investor should be yourself. You can do this by directly putting money for your business, or with the collateral on your assets. This will hold well with the banks as they will see that you are ready for a long-term commitment for your start-up business, and you are prepared to take risks.

Family and Friends

You could borrow money from your friends and family by making installment loans from them. When considering this decision, they might ask for equity in your business, and the assurance that you will pay them back in due time.

Before considering this, you should show them formal financial projections as to how they will get their money back, a healthy business plan, and the risks they will take.

Bank Loans

Loans from banks are the most typical source of capital for a lot of new businesses. Every bank has its specific features like customized repayment schedules, additional perks, and the like. Before choosing one, make sure to see their terms and services and if they meet your criteria. Also, banks have their own requirements to be met, as well as a good track record and an excellent credit score.

Talking about credit scores, having an excellent credit score will get you a higher approval rate for your loan. Take a look at your FICO score and age to see if you fit their criteria. If you don’t, they could still let you have a loan from their company at the expense of having higher interest rates.

Microloans

The lack of credit history, collateral, and the ability to get a loan from banks doesn’t mean that you can’t borrow money from lenders. You could get yourself a microloan. Microloans are better for small businesses as they could lend you money from 500 dollars to 35000 dollars. Microloans are small, so commercial banks will often reject your application. Instead, you can borrow money from a microlender.

Microlenders will offer you smaller sizes of loans with less documentation from that of a bank and not to mention, they are more lenient with requirements, although they can give you a slightly higher interest rate. If you are a start-up business looking for money to finance equipment, staff, or capital, they can help you with that.

Angel Investors

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When you have thought of finding an angel investor, it might be a good idea. One can be very helpful for your business, as it could also be a source of funding. When pitching for one, you should always be formal and detailed in your presentation.

Adding experience to your staff will help the investor be at ease about the future of your business. An experienced advisor that is adept and a professional in the field will help you last longer in the market, as well as make your investor set aside his/her fears about the business’s adaptability in the economy.

Being knowledgeable about your business, the market and the strategy that you will take will help you get the approval of the investor. Do market assessments, make competitive analyses, and do reliable marketing with an excellent sales plan to impress your investor. Being a young company does not need to hinder your expertise on these subjects as they will give your investors a good idea about your plans for the future of the company.

Takeaway

Financing a start-up business can be quite complicated if you don’t know what you are doing. But with a good view of your short term plans, a good business strategy, and iron will, there is a good chance that your business will prosper. Keep grinding and your business will be sure to make profits in no time.


https://www.bdc.ca/en/articles-tools/start-buy-business/start-business/pages/start-up-financing-sources.aspx