To start a small business is one of life’s most rewarding options. However, it takes more than hard work to succeed – you will need money to get it off the ground in the first place. But what do you do when you are already in debt?
Obviously, the size of your initial investment is determined by the type of company and the scale on which you intend to start, but even home-based small businesses can cost thousands of dollars to get started.
Financing your small business can be difficult, especially if you have lots of other financial commitments. Debts can make is more difficult to access more traditional sources of financing, such as business loans. As well as that, it is important to remember that it will take your company a while to make a profit, so will need to have a way of supporting our living and running costs in the meantime.
Here, we look at some of the ways in which you can start a business when you are in debt.
Reduce your expenses
The first step towards building a business when you are deep in debt is to cut your personal expenses back as far as possible. It means sacrificing all of the luxuries – no matter how small. It is a huge step, but so is starting up a business, and you are going to have to get used to making sacrifices throughout your career. Cutting your cost of living gives you more money to invest in your business, and making surviving financially on a day to day business easier while you wait for your business to begin to turn a profit.
Whittling down your personal expenses is difficult, but there is something else that you can do to generate some much-needed cash: consolidate your credit cards.
If you have a high-interest credit-card balance, lots of your money will be going on the monthly payments. Even if you pay the minimum amount, you will spend a fortune on interest alone. To cut costs, think about using a finance option such as Dune Ventures to consolidate or eliminate your credit card debt.
Check to see if you are eligible for any grants
While you might not be able to get a small business loan to start up your business, you probably won’t want free cash! The good news is that there are small business grants available, which do not have to be repaid.
You need to do your research into these grants, but one thing is for sure; you will need a solid business plan in place to even be considered for funding. You also need to have a good pitch ready because you will be up against some competition. Make sure that you only apply for grants that you are eligible for, otherwise it is a time-wasting and resource taking activity.
Crowdfunding lets you secure your business support without having to accept any debts until you are ready. However, your project or proposal needs to be interesting enough to capture the attention of a crowd.
To be successful at crowdfunding, you need to do the following:
- Be prepared to promote yourself aggressively on social media
- Make engaging videos to talk about what you hope to do with the funding
- Have a plan of action for what you intend to do afterwards
In the end, everyone’s financial situation is different. What will work for one business or person may not work for another. However, it is good to know that even if your finances are in less than perfect shape, there are still options available to you to help get your business off the ground.