Starting up your own small business is a time full of both excitement and anxiety. Unless you have a large stash of cash behind you, which few of us have these days, one of the first things you will be doing is looking into how to fund your business. This may seem at first glance to be a rather restricted area with few options available, dig a bit deeper however, and you will find there are more avenues open to you that you originally thought.
The traditional way of funding a small business is to go to your bank with your business plan and speak to one of their specialist advisors. When you take out a business loan from one of the banks that are going all out to support small businesses, you all have the peace of mind that you have their full backing every step of the way and they will help you navigate any obstacles that form during the crucial first year when so many new SMEs fail.
Despite all the bad press about banks and their strict lending criteria, this mainly applies to mortgages and the Halifax in particular is dedicated to helping the growth of the economy by making funds available for businesses. This will come as a relief for those who haven’t bothered applying for a business loan as they simply didn’t think it was viable, and as many rightly belief that this is the safest way of funding a business it should be the first avenue you explore.
Another, but far more risky, way of financing a business is to re-mortgage your home. If you are considering this then do your sums carefully and only borrow the minimum amount you need. If you have worked hard to pay off your mortgage you may feel rather reticent about going into debt with it again, and a chat with a business advisor will help you come to a decision. This is a route more prevalent to a business which is already up and running and experiencing a cash flow problem.
Aspiring entrepreneurs, however, to like to take a risk, have other options to consider if the aforementioned ones aren’t viable. If your business consists of you manufacturing a new product a popular avenue worth exploring is crowd funding. This effectively means that you put your product on one of the websites that do this and input how much funding you need. Investors then make pledges that, hopefully, will meet or even surpass the figure you need.
Sweeteners are offered to investors, such as getting the product for free when it first rolls off the production line, or a share of the business. Many have gained success through crowd funding but many have also failed, so you really need to have done your homework to make sure there is a viable gap in the market for your product and that the manufacturing costs leave a decent margin for profit when it comes to the selling price.