Every year many Americans come up with ideas of new products or how to put a new twist on an old idea in an effort to start their own business. While starting a new business can be exciting, you’ll find that funding a start-up company can be stressful as well. If the business launches and becomes a success the gamble of funding a start-up company will result in an overwhelming since of pride and achievement. I want to take you through some of the ideas that I had when I had to go through the process of funding a start-up company.
This is probably the most frequently thought of idea for funding a start-up company. If available to you, I would recommend a line of credit over a traditional loan. A line of credit provides you with more flexibility with respect to terms of repayment. A traditional loan will have a set amount and payment schedule and the revenue cycle for your start up my not be set in stone which would make it difficult to make traditional loan payments. The drawback here is that you will more than likely need assets or guarantors which may not be available to all new business owners.
There are many industry specific private investment firms that may help you out. Private investment firms understand that funding a start-up company can be a risk that some banks aren’t willing to take. The problem here is that there may not be an investment firm for your particular business type available.
Funding a start-up company with credit cards can be very risky if not handled properly, but can be an incredible cash flow tool if managed right. The trick here is to use the cards to create short term loans for you and pay them in full before the interest accrues. When funding a start-up company, there isn’t a ton of excess cash to play with so don’t get caught making interest payments to credit card companies. That’s a sure way to end on the long debt highway.
Liquidation of Assets
You would be surprised how many things you have that others value. I had an extra car and I can only drive one at a time. This can be one of the safest ways to go about funding a start-up company. I have known others that have had yard sales and storage sales to raise money. You may have to combine this with a lending method, but remember that every dollar you don’t have to borrow could equal a dollar plus some cents that you don’t have to pay back.
People You Know Often times, many new projects come about because someone has encouraged you to go ahead with this great idea. These friends and family members can be a great source for funding a start-up business. I caution you to treat these sources as you would a lender or business partner. Have legal documents drawn up that give them repayment details or percentage of stake in the business until repaid. That will make them feel much better about the funding and may provide you with avenue for lending on a future project.