Five Ideas to Finance a Small Business

Do you have a brilliant idea you’d like to transform into a small business? Intimidated by the prospect of financing your endeavor? It’s perfectly understandable, but the path toward transforming your idea into a reality may be less daunting than it seems. Whether you explore self-funding, assistance from family members, a small business loan, crowdfunding, or outside investment, it is important to know the costs and benefits from the outset. In this article, we will discover some of the finance options available to entrepreneurs embarking upon the business adventure, and the unique features of each.

Use personal savings

A simple method of funding a small business is to utilize your own personal savings. Of course, this depends entirely on your individual situation; your safety net is there for a reason, and it is not sensible to funnel all of your savings into an untested business idea. However, if you have a sizeable fund available, and the start-up costs of your business do not make a critical impact upon it, using your savings can be a good decision. The complications of involving an outside investor are entirely removed; the entrepreneur retains complete creative control, makes all of the business decisions, and is not accountable to anyone else should the idea not be successful. And if the business is a success, the sole investor will not need to issue a dividend to anyone else. This method is not without risk, but if circumstances permit, it is certainly the most straightforward.

Involve friends and family

If you are fortunate enough to have a family member or good friend with the resources available to make an investment, it is certainly worth approaching them for assistance. As with any investment agreement, you will need to set the terms before any money changes hands. You will also need to ensure that business dealings will not put a strain on personal relationships, and vice versa. That said, involving people who already know you, and wish to see you do well, can be a great way to fund your small business.  

Take out a loan

If you’re looking to retain complete creative control, whilst avoiding use of your savings or the resources of a friend or family member, consider a small business loan. You will be accountable to the lender, but this method is much more straightforward than seeking an outside investor. Learn more about small business loans today.

Crowdfund

Connecting with small financiers on a large scale has never been easier! There are several websites which allow you to present your business idea and secure investment online. You will still be liable to your investors, but instead of a monetary dividend, you can offer an alternative such as a free product or discount.

Find an investor

Outside investment is still a good option if you do not have the funds independently. The financial risk is taken by the investor, and terms are decided prior to any agreement. An investor may wish to have involvement in business decisions, but you can negotiate this in advance. Consider the amount of control you will need to retain before you approach an investor, and make sure both parties are reaching a good deal.