It’s hard to start a business in this era, especially if you don't have capital. Financ
It’s hard to start a business in this era, especially if you don't have capital. Financing a business is one of the first and most crucial steps most business leaders do. How you decide to fund your small business could also affect how you run and structure your startup business.
Also read: How-To-Raise-Capital-For-Small-Business-in-Kenya
Determine how much the funding will cost
Each business has different requirements, so a financial solution may vary. Your mission and financial goal will shape the financial structure of your business. Once you know the exact amount you’ll need for business, now figure out how you’ll get it.
Fund your business by yourself
Self-funding helps you secure your financial resources and support your business. This involves using your savings accounts, supported by friends or family, or using your 401(k) plan.
With this type of financing, you’ll take maximum control over the business, but you’ll have to take all risks by yourself. Make sure you spend what you can afford and be cautious if decide to use your retirement accounts. Otherwise, you might prolong your retirement time, or be charged extra fees.
The appropriate way is to seek a personal financial advisor and have a plan first.
Get venture capital from investors
Lenders can give funds to start a business in different forms including venture capital investments. This capital is often provided in the exchange for an active role and an ownership share in the business firm.
To get venture capital, you must be ready to give minimum shares of your company and a seat on the board of directors.
How to get venture capital funding
There's no specific route to get venture capital, but the entire process is as follows.
1. Find an investor
3. Go through due diligence review
4. Work out the guidelines
Use crowdfunding to finance your business.
Crowdfunding raises money for small businesses from crowdfunders. These people aren’t investors because they don’t expect any financial return and don’t receive ownership in the business. Instead, they get a gift from the business firm as thanks for their contribution.
Normally, that gift is a product you expect to sell. And that makes crowdfunding the best option for individuals planning to launch creative works such as a physical item or a documentary.
Another advantage is that crowdfunding has low risk. Each crowdfunding is different from one another, so ensure you read the guidelines and understand all financial obligations and legal frameworks.
Get a small business loan
A small business loan is another way to take retain complete control of your business even if don't have enough capital to start your business. To boost your chances of getting a small business loan, ensure you’ve a financial plan, business plan, and expense sheet for the next five years.
The tools help lenders know whether they're making the right choice or not. They also give an idea of the amount you'll need for your business.
Once you’re ready, reach out to credit unions and banks to request a loan. But ensure you compare several quotes to get one that matches your needs.
Also read: List-Of-Small-Business-Government-Grants
Use lender match to get leaders who offer SBA- guaranteed loans
If you’re struggling to secure a traditional loan, consider an SBA-guaranteed loan. The United States Small Business Administration offers loans to small businesses even if the deal looks risky.
That means the lender has less risk and is ready to give your business a loan. You can also use Lender Match to find a lender who gives SBA-guaranteed loans.
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