Starting a business is more than just dedication and having superb ideas. Especially with this COVID-19 crisis disrupting our lies and the economy, it can be challenging to open up an enterprise.
Not to mention, making your dream of starting a business reality means figuring out how to finance its inception. One way to streamline financing options for your startup is to calculate how much you actually need to kick-start it. Every business model has varying needs. There is no one-size-fits-all financing solution to any business venture. Being an entrepreneur means figuring out what is well-suited for your business model.
But despite the initial economic setback brought by the pandemic, there are still plenty of ways for aspiring entrepreneurs to fund their startup companies. The government has also been consistent in handing out financial aids to help stimulate the economy. With this in mind, here are some of the most viable financial solutions to help jumpstart your business plan.
There are many ways how you can self-fund your business. Most dip into their savings account, sell their car or apartment to raise funds for business capital. Some even tap into their retirement savings just so that they could finally start their dream business.
However, though it is the easiest and most straightforward way to fund your startup, not everyone is willing to shell out. The risk is huge, not to mention, it is more fun spending other people’s money.
But there are plenty of benefits when you opt to self-fund your dream business. Using your hard-earned cash, you are actually teaching yourself to make more sensible and wise business decisions in the future.
Also, by choosing to self-fund your business, you retain complete control of it. It is in your hands to pave the future of your business. Nonetheless, you have to take all the risks by yourself.
Getting an angel investor to finance your business idea is another great alternative to securing traditional loans. Furthermore, it would not be a problem for an angel investor to provide you a large capital for your startup.
So who are these angel investors? These angel investors are seasoned entrepreneurs and professionals who offer their assistance to young startup businesses with promising investment value. According to Entrepreneur, angel investors are willing to fund an average of $600,000 for aspiring business owners.
The only disadvantage, though, is having your business financed by an angel investor means giving up a portion of the company’s ownership to them. This percentage typically runs around 10 to 50 percent.
Crowdfunding is another popular alternative in raising money to finance any endeavor, be it business or personal pursuits. These days, there are plenty of platforms where you can raise any amount to finance whatever you need financing for. Some notable crowdfunding platforms are Indiegogo, Kickstarter, GoFundMe, and for non-profit causes, the best bet is Patreon.
Crowdfunding not only helps you raise the money you need to finance your startup, but it also serves as a marketing avenue to let others know about your business. You have to be selective, though, picking the best crowdfunding platform to boost your reach in finding potential business financiers.
When opting to crowdfund, put some effort to make your campaign attractive as much as possible. Highlight your business advocacy. Help potential investors understand why your startup business has to come to life. Everyone loves a good story.
Small Business Administration (SBA) Loans
If you do not have enough money for self-funding or crowdfunding is not working out for you, another great traditional loan alternative is applying for a Small Business Administration Loan (SBA Loan). SBA Loans allows you to retain total control of your business, and it offers more generous term lengths and interest rates. It could even finance 80 to 90 percent of your startup costs.
Also, unlike traditional loans, this type of loan has a lower down payment requirement. Nonetheless, you have to provide collateral as loan security as a standard requirement for SBA loan approval.
Though the current crisis, the COVID-19 pandemic, has drastically changed the economic landscape, it opened the way for new business opportunities as consumer needs change. For example, as months passed, the real estate industry has proven to be one of the resilient sectors in the pandemic. If you are considering opening a business in this industry, hard money lenders are more than willing to help you out.
Finding the best financing option for your startup business is not for the faint-hearted. Ultimately, paving your way in the business world is never for those who fear taking risks. There is no such thing as the perfect time to “start” a business. So, you might as well start it now.