Starting a business is a big step in becoming an entrepreneur, and it requires significant capital to get an enterprise off the ground. Whether you've been saving for years or have just decided you're ready to be your own boss, finding the money to start a small business can be a difficult first step. There are tons of options you can use to finance your business, but which is right for you? Taking the time to evaluate both conventional and creative funding routes could help you find the best option you didn't even know existed.
The first things that probably comes to mind in this scenario is small business loans. These are by far the most popular way to fund a new business. You can usually apply for a loan through your bank, speciality loan companies, or the Small Business Administration. The thing to keep in mind with this route is that you're creating debt in the hopes of profit, which makes it a little bit risky. You'll want to make sure you have a solid business plan and healthy projections to make sure you can pay on the loan each month and avoid interest from building up. When you go in to apply for a loan, it's common for the institution to request a copy of that business plan, plus expense sheets and any other models you have to prove you're a good investment. A good business plan can also help to secure a lower interest rate.
Crowdfunding is a relatively new idea that helps businesses raise the money they need to get started. This path works great if you've been saving for a while and just need a little extra to push you over the edge, or if you're an inventor looking for capital to make your prototype. You can use platforms such as Kickstarter or GoFundMe to start a fundraiser anyone can contribute to. Sharing the link with friends and family is a quick way to generate interest among your social circles, but leaving the projects public also allows strangers who believe in your business to make donations as well. There are a number of different sites all with their own rules and specialities, so do your research before setting up to make sure you're setting up the best situation for you.
Another popular route to find money for your business is to seek out investors willing to help you financially. One type of investor is called an angel investor. These "angels" have helped to fund major companies such as Google and Yahoo, and your business could be next. Angel investors are people who are always on the lookout for the next business to put their money in. They believe in small businesses and startups if they see opportunity for major growth. The only catch with these investors is that they usually require some kind of equity in the company in exchange for their financial backing.
Another investor option is finding a venture capitalist interested in your business idea. These people act similarly to angel investors because they also request equity and can provide generous startup funds, but they go one step further. Most venture capitalists also like to have a say in the direction of the company as it grows. Keep this in mind when searching for investors. If you want someone who will help to guide your business as it grows and offer educated insight, then a venture capitalist is your best option. However, if you just need someone to supply the cash while you get your idea into the market, then an angel investor might work better for you.
If your business baby just needs some TLC to really get moving, then consider researching if your city provides any business incubators or accelerators. In many large cities or areas looking to stimulate their economy, the local chamber of commerce will set up some type of business incubator to help startup companies or young entrepreneurs get their start in a fairly safe and controlled environment. They sometimes offer things such as financial assistance, office space, access to business resources, or business consulting by community success stories. This option is great for first time business owners or people who haven't fully fleshed out their business ideas yet. You can find help creating a business plan or finding affordable space for your office while developing your enterprise with the help of experts.
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There are tons of different ways to fund a small business, and this article lists just a few. The key is to do your research and consider all of your options before settling on the right path for you. Look at small business loans, crowdfunding options, different investors, or business incubators in your area to find the best path for starting your new business.