(This is a contributed post)
Starting a business can be expensive. Most people don’t have the available funds lying around and so have to look into ways of raising funds. Here are just three different fundraising options for covering the costs of your startup.
Saving up funds to start a business takes the most self-discipline. Depending on how much it costs to launch your startup, saving up funds could also take a long time – which may not be ideal if you want to get stuck into your business straight away.
Unlike other forms of funding however it will be your money that you’re raising, so you don’t have to owe anything to anyone after. This can make the whole process of launching your business more rewarding and you’ll have less costs to cover in the long run.
Many banks offer high-interest business savings accounts that could help you to save up money more quickly. It’s worth shopping around to find the best interest rates.
Borrowing money is a popular option for those that want to get their business set up quickly. A loan could allow you to launch your business in a month rather than having to potentially wait years.
Of course, the money has to be paid back with interest, so you need to be certain that your business will be profitable from the start. Taking out a loan may also require you to have a good credit score – particularly if you’re taking out a large loan.
There are so many different forms of borrowing money. If you’re buying equipment or vehicles, it could be worth looking into individual finance schemes such as truck finance. Meanwhile, if you don’t have an accurate idea of how much your business will cost, you could consider a line of credit – this works a bit like an overdraft with a larger limit, allowing you to dip into it while only having to pay back the money that you borrow. There are also traditional loans as offered by a bank or private lender. Generally speaking, banks offer lower interest rates than private lenders, however you may need a better credit score.
Another option is to encourage other people or other businesses to invest money into your startup. Seeking investment is not simple – you need to be able to persuade investors that your business has the potential to be profitable for them, which often involves offering shares in profits and presenting a detailed plan in how you intend to earn these profits.
It can however have its benefits. Unlike a loan, you only have to start paying back the funds once your business is making an income. Certain investors may also be able to offer more than their money, including professional advice and support to help your company become successful.
There are different ways to seek investment. You could approach a angel investor to give you all the funding that you need. Alternatively, you could look into crowdfunding – this involves raising money from lots of different people and giving each of them a slice in profits. There are platforms online set up for finding angel investors and for organizing crowdfunding campaigns.