Beginning a business takes more cash than one would expect, and inevitably, even the most prepared entrepreneurs need to secure startup financing. Turning to big banks is not the optimal solution, as they rarely lend small amounts when it comes to business loans. You only need the cash you need, not extra and the interest that’s added to it. This is why many people turn to alternative methods to secure their funding. Here’s how to get your share and from whom.
Write Out Your Business Plan
In order to determine the money you’ll need, write out a professional business plan. Three of the sections will be crucial in determining your startup financing and the best options for securing it: your business’ structure, your operations, and your financial statements. The first and third will show who owns the business and their personal financial health. The second will help you calculate the money you need to cover your operating costs.
Assess the Plan Once Completed
After you have a complete and realistic business plan in place, take a good look at it. If you have minimal costs that aren’t already covered, you might be suited to find a personal way to secure your startup financing. If you need a significant amount of cash, alternative lenders or grants may be the way to go. If your credit is strong, you have more options; if not, you might need to engage in some creative thinking.
Get the Cash
Assume you have a majority of your new business venture already financed and you only need to secure a couple of thousand for equipment. Your credit is good, but your first-year projected profits are a little slim. You might want to seek the additional cash you need from family, friends, crowdfunding, or your own credit cards or retirement funds. Smaller amounts can be paid back quickly, and in the case of crowdfunding, you wouldn’t need to pay the monies back at all.
If you need more than that, you can seek microloan and other loan types from the Small Business Administration. These loans are oftentimes designated for startup financing, and the interest rates are comparable to big-bank lending. If your credit isn’t stellar but you have a solid profit plan, angel investors are experienced and successful business people willing to put their money into your company. They will want some say in how you run the operation, but this will only be helpful as you launch your new business toward success.