Funding your business start up is often something that can stop your business idea in it’s tracks. Where will you get the money? How much do you need to get your start up going? What can you do to ensure start up loans? All of these questions may not be answered here, but I do have three tips for funding your start up.
#1 Utilise savings for funding your business start up
Personal money saved up for funding your start up is the best option. If you do not have enough then you can look at other options, however it is always recommended that you start saving towards costs as soon as you are sure that you want to set up your own business. The ideal situation would be to have a year of operating costs saved up for your business start up. This amount of money should not be what you need for your mortgage and personal expenses. It should be enough to support the business only; you will need to save separate funds for your personal expenses. Get into the habit early and start separating your personal expenditure with your business accounts. One idea would be to set up a new bank account for business purposes only, ultimately keeping everything separate and manageable.
#2 Decide on whether a business start up loan is suitable
If you find you do not have enough funding for your start up, then you have to make a choice. Do you wait another year until you have the appropriate funds or do you look for start up loans? The US government has been very helpful of late to establish grants and funding options for small and new businesses as a way to combat the recession issues. Banks are still holding tight especially for start up loans. They may make it very difficult by asking that you have at least enough funds for a year or 80% of the start up costs in your savings account. Still, loans can be helpful if you qualify. The downside to loans is that most businesses fail within 5 years and you may still need to pay the start up loans back. Most experts suggest you avoid loans, but if this is not possible be sure to carry out solid research and to prove your business can be a success and profitable.
#3 Seek investment for start up funding
Investors are another option to business start up loans. Investors are quite helpful if you know someone willing to split the company in terms of investment money. You will need to present a strong business model and provide potential investors with a business plan and summary of your company mission. Initially, you will want to be the majority owner. You definitely want to use as much of your own funding as possible as this helps you retain control of your company. Decide what type of investor you want to attract – sometimes it is preferable to have a silent investor- one that is not going to want to have daily input in your business.
While you may not find a silent investor easily, look for one or consider taking on a partner you know you can work with and has the same vision as you. Partners in a business start up could bring a bit more capital to the table and have an extra employee to help you out. There are pitfalls though, so ensure you think through all the options first.
Your turn! How did you manage finances when you started your business? How are you planning for the costs associated with your start up? Please share your experience below.
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