One of the first things that you need to consider, when starting a new business, is how you are going to finance your starting costs. There are hardly any businesses that involve zero startup cost. As you create your business plan, put careful consideration into your financing.
To help you learn which options are available to a new business owner, use these # best methods of obtaining financing.
#1 – Apply for Credit Cards
Having a credit card can be very useful for a new business, but you need to use caution. You should not use credit cards as your primary source of financing. Do not rely on your credit cards, but use them to help establish credit.
They should be used to cover nominal costs, such as supplies and small equipment, so that you can pay off your credit card balance as quickly as possible. In fact, you should plan on only spending as much as you can reasonably afford to pay off within the next 30 days, or before the start of your next billing cycle.
#2 – Getting a Bank Loan
One of the first sources that you should consider is a bank. This is the most stable and secure way to obtain financing for your business venture. Most banks will not create a line of credit for more than they decide is reasonable.
They will look at your own credit history, along with the credit history of any of your partners. Current income and current net worth (value of your property) will also be a factor.
Finally, they will look at your business plan. They will examine your research, goals, proposed costs, estimated market potential, and other stats included in a well written business plan.
Once you are approved for a loan, you will have a working figure. This is the amount that you have available to get your business up and running.
#3 – Operate a Second Business
If you have another skill or resource available to you that could result in quick income, consider operating a side business. You could use the profits earned, after operating costs, from this small side venture to help fund your new business.
Examples of a second business include anything related to the making and selling of crafts, home decor, and clothing. Those are all easy side projects with minimal costs and a product that could easily be sold online.
Another idea for a side project is seeking freelance work. If the skills related to your new business could be used for other purposes, then obtaining some freelance jobs could provide fast income for your new business.
#4 – Use Crowdfunding
Crowdfunding websites are very popular at the moment, but there is no telling if these websites will stand the test of time. For now, they are a viable option for funding for your business.
Typically, these sites allow you to propose a project or business and ask for donations. Depending on the amount donated, the person backing your project would receive a product or item related to the project. They are essentially paying for your product or service before it is produced or ready for the public.
If you choose to use crowdfunding, it is important to follow through with your plans. The people donating to your business are expecting a product.
Hopefully, these options gave you some potential ideas of how to get financing for your business. The first place that you should start is with the bank. Be as prepared as possible, with a detailed business plan and thorough research. They may even suggest that you wait until you can establish a better credit score.
If you cannot get financing from a bank, think about using a crowdfunding website. Also, a credit card can be useful, but never rely on it as your sole source of funding. Other options include pre-sales, where customers or vendors place an order for a product or service before it goes into production. These orders are often given at a discount.
Keep these options in mind, as you fill out your business plan and begin considering your financing.