Article by Hannah Whittenly
You’ve got a great idea for a new business and a solid plan, but you may find coming up with the funds is the real challenge. Total up a list of your expenses, including materials, labor, office equipment, licenses, permits, insurance, and a little operating capital. Here are some ways to raise that seed money.
Find Lenders
Banks can be very fussy about new business loans, knowing that many new businesses fail. You may have to go to great lengths to get the money. You could consider applying for a personal loan instead. Credit unions and small local banks can also be easier to deal with than large commercial banks. There are also small business loans from online lenders. Be sure to look into government loans for small businesses.
Use Personal Assets
If you have good credit, your credit balance or a new credit card can provide funds. You may have equity in your home you could borrow against, or stocks, bonds, and retirement accounts that could be cashed in. Vehicles, jewelry, antiques, or anything else you feel is valuable can be sold or used as collateral. Look for ways to cut expenses. For example, you could buy recycle pallets, like those from Smart Pallets, for your warehouse so that you don’t have to buy brand new ones.
Locate Investors
Wealthy “angel” investors may have deep pockets, but usually want a share of your company and its profits. Venture capital firms invest in small companies as a business, but expect some level of control. In return, they may also provide advice and guidance. You could also try crowdfunding sites. Numerous individuals may be willing to donate small sums either in exchange for public shares, or as simple donations to a great idea. Decide which kind of investor relationship you can work with, and focus on finding and winning them over.
Scale Back
About $39,000 AUD is the typical startup cost, but micro-companies can get started for under $3,900. Consider going into operation with whatever you can afford, even if it’s a bare-bones home business. If you can get established with some good revenue and faithful customers, other funding will come easier. You may even find that the best financing option is to reinvest your profits into your company.
Borrowing money or courting investors is often not a realistic option for entrepreneurs who have a good idea but little else. If you can’t seem to make an impression, carefully weigh your options, minimize your costs, and try every other means of obtaining whatever funds you can.