Business,

How To Finance Your New Business

5/04/2019 RAWAT 0 Comments

Starting a new business is exciting, and thanks to technology and the availability of important information that might not have been accessible just a few years ago, it is now easier than ever; almost everyone can launch a business if they choose to.


There are many things to consider beforehand, however. It is vital that you don’t rush into your new business without thinking things through and putting everything in place, to begin with. If you do rush in without proper preparation, you will find that you aren’t as successful as you might otherwise have been and could find yourself losing money rather than making it. That is why one of the most important elements to consider is funding. Just how are you going to finance your new business? Read on for some great ideas that will help you make the most of this opportunity.

Personal Savings

Everyone should have at least some savings if at all possible. It is these savings – if you have them – that could certainly form the basis of your new business. This will mean you don’t have to look at borrowing any money right from the outset, allowing your credit to build up and your reputation to grow so that if you do need to borrow money in the future, the lender is more likely to agree. It also means that you won’t have any additional shareholders who will receive part of the business; you can keep it all to yourself.

Remember, using your savings to fund your business should be treated as a loan; you are lending the business the money. Therefore, you will need to put a repayment plan in place and ensure that you are not left out of pocket. It is your choice when these repayments should start and how much (if any) interest you charge, but replenishing your savings should be done as quickly as possible.

Investments

Savings come in a variety of different forms, and you might not have traditional savings in a dedicated account; you might have investments in stocks and shares, or even property, instead. Again, these can be used to fund your new business assuming you can withdraw money from your portfolio in some way.

Only withdraw what you need, even if it is tempting to take more. Over-funding a business is just as dangerous as under-funding and can cause problems with cashflow later on. Not only that, but too much money will mean you could over-extend your business, and there is more chance of failure.

Business Loan

If you have no savings or investments, or you prefer not to use them for your business, then a business loan might be a sensible option to look into. This is often the first thing that people think of, and for good reason; there are a plethora of places you can go to borrow money for a business to get started. A business loan means that you are borrowing a set amount of money that needs to be paid back over a set amount of time, including interest. The interest will depend on how much you borrow and how long you intend to take to pay it back. Knowing how much you are borrowing and how much you are expected to pay back each month is useful for budgeting purposes; you will never be caught by surprise and the figure can be factored into all calculations.

In order to obtain a business loan, you will need to write a business plan. This will detail why you need the money and explain how you intend to use it to grow your business. Having a business plan is not something you should only have if you want to borrow money; it is a useful map that will take you where you want to be in business, and following it will keep you from getting distracted.

Personal Loan

Although a business loan sounds like a good idea, it isn’t always easy to obtain one. Lenders will want to be sure that they will get their money back, and therefore they will look very carefully at the business plan presented. If there is no plan, or they cannot see that they will get their money back, for example, they may refuse to lend. What happens then?

If this happens to you, you can look at getting a personal loan. Even if you have bad credit, there are a variety of different loans to suit you; you can get more information here. Obtaining a personal loan and then in turn lending that money to your business could be the answer to your funding issues. As mentioned above with regard to your savings, a contract should be set up to ensure that the money is repaid; you are personally liable for paying the money back since it is a personal loan, so if the business is unable to pay you for any reason, you will still need to pay the loan yourself.

Angel Investors

Angel investors can offer a great deal of value to a business, and not just in financial terms. The will be able to invest the right sum into the business, but in some cases, they will also be able to offer input into how to run it. This can be invaluable, and even if they require a large amount of equity to gain a good return on their investment, the advice and contacts they have can be what boosts your business, so it is certainly something worth considering.

An angel investor is either an individual or a team of people who actively invest their money in up and coming businesses. They will want to know a lot about the business, and they will do a lot of background checks, so make sure that you have as much information to hand as possible in order to facilitate them. For some, they will want to be passionate about the business they are investing in, and for others, it is more about money.