Every business needs financing at every stage, considering the cost involved in running an active one. However, finding financing can be challenging, whether you are looking for capital, start-up funds, or cash on hand to sustain you during tough economic times. Thousands of companies are created every year and the common denominator in all these companies is the money factor. Business financing is vital for the growth of any business and we have highlighted some of the ways you can finance your business, especially as a small business owner.
1. Savings
This is the easiest and the most common way to finance a business. Many people tend to save up to a particular amount to kickstart their business or to support whatever loan they may have to take. It’s advisable to save some money for some time before starting a business, as it helps reduce possible loans and debts in the long run. The major challenge with this is that you are limited by how much you can save over time, considering how much more you would need to run a business.
2. Bank Loan
This is a viable option for anyone looking to take loans to start their business but the process tends to be strict, as it requires several documents including collateral. However, if you can meet the requirements and are qualified to get a loan, you can go for it, as this is a secure method of taking loans compared to other non-traditional methods.
3. Credit Cards
This method is quite risky as it can ruin your credit score over time but it is still an option to help finance your business. It also comes in handy if you can’t qualify for a bank loan or if the amount needed is less than $50,000. The good side to this is that using credit cards help you earn rewards on business-related purchases such as discounts and certain protections on purchased items. If you use this option responsibly, you may worry less about ruining your credit score and get enough to finance your business.
4. Friends and Family
Most people ask their friends and families to invest in their business, which saves them a lot, especially on interest. Your friends and family can support your business but could also have their interest rates, which might not be as high as the traditional loans. You can either request a business loan with a plan to pay over a period of time or you get them to make an equity investment where you sell them a part of your company. The downside of this is that you could risk your relationship with them if something goes wrong. To avoid that happening, it’s best to have a binding contract that states clearly the terms and conditions involved.
Conclusion
Financing a business is no easy feat especially at the early stages but not impossible. Look for a financing option that would work best for you and your pockets until your business can fully sustain itself with its revenues.
