Without financing, the rosy pictures painted in your business plans remain plans. Only when you can access funding can you get off the ground and get your business idea moving.
Many entrepreneurs ponder about where to start in raising the capital needed to start a business. This post highlights some financing options like microfinancing and other available alternatives.
Consider All Funding Options When Seeking Financing
As an entrepreneur, you need to know the various funding options available to start your business.
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Self-financing
Also known as bootstrapping, self-financing involves fundraising from your savings, family, and friends to start your business. When you self-finance, your business begins with limited debt.
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Personal Loans
It’s easier for entrepreneurs starting businesses to apply for personal loans than business loans as the requirements are less stringent. Most personal loans are capped at $40,000.
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Microloans
Upcoming entrepreneurs can look for microfinancing options from digital lenders who offer flexible credit.
Microloans are typically small amounts that are approved and released within a day. Moreover, microlenders do not require collateral to lend but depend on automated algorithms to approve your business for a microloan.
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Business Loans
Business loans are cost-effective to raise substantial capital to scale your business idea to the next level.
Business loans may be short-term or long-term, depending on the requirements of your business. Long-term loans are ideal for heavy capital expenses, while short-term loans meet the working capital needs.
Business loans may come in various forms:
- Government-backed SBA loans
- Real estate loans
- Equipment financing loans
- Invoice Financing
Invoice financing involves raising funds by asking a lender to advance your business cash based on unpaid invoices.
- Lines Of Credit
Lines of credit allow the business to access funds flexibly whenever needed. As long as you draw within your approved limit, you can use the funds for whatever business needs. However, you must pay the interest within the agreed timelines.
- Alternative Sources Of Capital
Here are some common alternative funding sources:
- Crowdfunding; Kickstarter, Indiegogo, and GoFundMe are excellent examples of online crowdfunding sources.
- Venture capital
- Angel Investors
- Business grants from government and the corporate world; Check www.grants.gov for government grants
- Peer-to-peer lending
- Microfinancing from fintech lenders.
Make A Business Plan And Track Your Expenses
A business plan articulates your business idea and provides forecasts of future business performance.
A business plan is essential to your business in several ways:
- Improves your chances of success at fundraising by providing a comprehensive overview of your business to would-be investors and financiers.
- A great tool to assess the viability of your business idea.
- Guides your routine operations to enable you to achieve your sales and profit projections.
- It can help point out funding gaps as you identify trends in your cash flow projections.
- A business plan helps guide business resource allocation to meet the business's strategic objectives. For example, if a company plans to grow sales aggressively, there may be a need to invest in marketing automation.
- Tracking expenses helps stimulate corporate austerity and drives a cost-cutting regime.
- A business plan is an excellent yardstick for performance monitoring. Business performance is measured against projections in the program to evaluate business success.
Be Prepared To Make Sacrifices To Invest In Your Business
Entrepreneurship is not for the fainthearted. Success in business doesn’t come by chance.
An entrepreneur must be ready to sacrifice their comforts and commit to long working hours, especially when the business is starting.
Apart from time, you’ll often sacrifice your money and put your reputation on the line for the business.
Network With Other Entrepreneurs And Learn From Their Experiences
Networking enables a budding entrepreneur to tap into the wisdom, experience, and business best practices of others who have gone before.
Through your local chamber of commerce, trade fairs, and exhibitions, you can link up with other players in your sector for mentorship and industry news.
Explore online professional forums such as LinkedIn to network with like-minded stakeholders in your industry.
Finally, motivation is key in starting and running any business, hence staying positive and resilient in adversity.
Conclusion
As an entrepreneur, you need to be aware of alternative funding sources to help you launch your business. Reach out to lenders who can offer microfinancing loans to help you start your dream business today.