When it comes to funding your business idea it can feel a bit overwhelming. The overwhelm that you feel comes from not knowing what your options are or who is out there to help you. I have broken a few of the most common ways to fund your business to help you shift from overwhelm to discovery.
Let’s look at how to get funding for your business.
Using Your Own Savings
If you have put money aside to build a business that is awesome. Did you do the research on what it costs to build and maintain a business? How much did you put aside and based on the information from your research how long can you last before you run out of money? If you are not bringing in an equal amount to run the business and expand for the future then eventually you will run out of savings. Pay attention to what you are spending on and more importantly what are you bringing into your business to create consistent cash flow.
The Small Business Administration is there with some great ideas for funding your business. They connect small business owners with lenders to build relationships for future utilization of money to help you stay in business. They will guarantee a small business loan so the lender is taking no real risk in giving you a loan. Instead, the SBA is taking the risk on your behalf. Later down the line, the lender is hoping that you will get a loan directly from them and they will get a bigger payoff from you. An SBA loan is a great start for a small business loan for finding funding for your business.
Bank Business Loan
Getting a traditional loan from your bank works great if you have good enough credit to do so. You must have your paperwork in order to make this happen. They want to know everything about you personally and professionally so they know how you intend to pay them back and if you don’t, then how they can use your assets to pay them back. I am not against bank loans, I just want you to know the truth. We have taken out bank loans and paid them off. There is a lot of work into getting the loan. If you do not have your profit and loss statements, income reports, business plan, and all personal financial documents in order like property loan documents, tax returns, and list of all assets this will take some time and energy.
Friends and Family
You can always reach out to family and friends to borrow money from. Sounds easy enough if you have family and friends who have the funds available to help you. Then you also take the risk of having that relationship take a turn if for some reason you can’t may this month’s payment because a pandemic shut you down and now they really need the income too. The right friends and family want to see you succeed and are willing to take the risk of lending you some money until they can no longer do it and they are calling for the loan to be paid back. If you don’t have that money then the relationship is likely to be broken and people get a bit crazy about money! How important the relationship is to you will determine how committed you are to paying them back quickly. Set a time frame to pay back a friend and family loan and stick with it. Value your friendships so much that you pay it back early!
Keep your day job and build your business. I so often hear coaches tell their clients to quit their job and go for your business full time and it will provide. For very few people does this happens. Why? Because it is a different mindset to be an employee than it is to be an entrepreneur. And most people are trying to run a home-based business like being an employee. More than 75% of those who quit their job to build a business end up back as an employee for someone else. My recommendation is to keep your day job. Start building your business as a side hustle and see how it goes. You might discover you don’t like the entrepreneur life. You might discover that you do. And you are working a job to pay the bills and use your income to slowly build your business. I did this for the first ten years in business. I found jobs to work around my business schedule. That created some flexibility to be able to do both. You may or may not be in the right job and that is a different topic. Utilize what you have now to grow what you want for the future.
You can find investors to help fund your business. I admit I do not know much about this topic. What I do know is there are some investors that are willing to take you on as a risk where a bank or the SBA is not willing to take you on as a risk. You will have to present all the same paperwork and they may want a piece of your business. Like the sharks on Shark Tank. Some investors want to be hands-on with you and others do not. There are also some amazing “Angel Investors” that put a lot of emphasis on helping certain groups of people without taking a big chunk of your profits. You will have to do the research to find what works for you here.
Another way for funding your business is to do crowdfunding. You know you have seen it, people asking for money for medical bills, funerals, and politics. You can ask and see if people what to invest in you. It will take some great marketing words and connecting to people at a heart level as a service-based business. But I have seen where people have gotten funding for their business from just asking their community to support them. It could go either way.
You can also be funding your business through your retirement accounts. You have worked for many years and have saved and been matched to build up your retirement. You can absolutely utilize those funds to build a business. There are some criteria for doing this and since I have not retired yet I do not have much experience here. There are some amazing fiduciary financial advisors out there to help you as well as a great certified public accountant to guide you through how best to use these funds so you get the best tax benefits for yourself and your business. Reach out and ask the questions and if they cannot answer them for you find a new CPA or Financial Advisor.
Rich Aunt Sally
Somewhere you have a Rich Aunt Sally and she is going to leave you money when she dies. We don’t know when that will really be so you are just waiting to start your business for “Some Day”. Please whatever you don’t wait for Rich Aunt Sally until you build your business. The world needs you now!