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Finding a way to fund your start-up can be hard. Even the smallest ones cost a considerable amount of money to get up and running. As a new business owner, you need to have the funds in place to be able to finance your new venture, and this doesn’t stop as your business grows.
The majority of small businesses piece together their funding from several different sources phased out over time, rather than rely on one to carry them through, and no single source of funding is necessarily easier to come by than another. It depends entirely on your business model, projections, and how well you can sell yourself to potential financial partners.
How can you fund your start-up?
An angel investor
No, I don’t mean one with fluffy wings that will sit on top of your Christmas tree, but the sort of investor that you will find on Dragons Den. Angel investors are the people that will give you the cash injection that you need to get your business up and running. However, you know that saying ‘there’s no such thing as a free lunch’? Well, that is the case here. They aren’t going to give you money for nothing, sadly. In return for investing in your business, an angel investor will usually want shares in your business, or to take a cut out of your profits when you start making them. If your business does well, this can be quite a lot of money, so before you sign that dotted line, think carefully.
Friends and Family
Getting help from your family and friends is a popular and effective way of raising some capital to get your business going. They, more than anyone, are likely to believe in your vision and your ability to turn that vision into a reality. But – and it is a big but- by borrowing money from them, you can end up putting your personal relationships at risk should things not quite go to plan. To avoid this happening, it is essential that both parties take out legal advice and structure this type of funding as a high-interest loan for a short period of time. Only take the bare minimum that you need to launch your business and get it off the ground, and then turn to other forms of funding once you are established.
Banks are stricter than ever when it comes to handing out loans, and if you’re a solo entrepreneur who is just starting out – well, you’re likely to be at the bottom of the pile. However, there are places out there that offer self employed loans, so do your research. Having a robust business plan, profitable projections and a little of your own money will all go a long way towards helping you get this source of funding.
Regardless of which path you take to fund your business, the chances are that you may do all of these at some point as your business grows, so make sure you find a safe and viable funding solution that also allows you to maintain operations and focus on maximizing your profitability.