How to fund your new business without a bank loan
If you have decided to go it alone and start your own business, you are probably feeling excited about the future, and quite rightly so! The prospect of setting up on your own and becoming your own boss is an elating feeling, but there is always a concern around funding and where you will find the money to get the business off the ground. There are a lot of outgoings when you start a new business, including initial set up supplies, marketing and office space. These costs can quickly spiral out of control. It is not as easy as it used to be to get a bank loan, so if you can avoid it – it is better in the long run. These are some alternative ways of funding your business, instead of taking out a bank loan.
With some businesses, you won’t need much capital to at least get your business off the ground. This is the mistake that many people make and it can really put you off starting in the first place. If you need materials, look around to find the cheapest option. If you need a laptop, try a second hand one first and start by working from home, rather than renting an office. Most businesses grow organically and although it might be difficult at the start; your business will grow, which means you can update all your materials and equipment as you go along.
If you have savings in the bank, this is the time to use them! There is no use in having savings, if you don’t make good use of them and starting your own business is definitely a reason to dig into these. When you fund your business yourself, it can be attractive to potential investors. It also saves you the hassle of asking anyone for money.
There are many government funded grants available for start up’s, so it is worth delving into this to see if there are any options available locally. With this option, you will usually need to complete a business plan before you will be able to proceed with an application. It is definitely a good option for either getting your business running in the first place or to build on what you currently have in place.
If you need access to a loan in the short term for materials or equipment for your new business, but either don’t want to go to a bank or you know you won’t be accepted, a payday loan can be another option. It is important to ensure you can afford to pay it back when the loan repayment is due, usually your next pay day. Payday loans can often be a quick and easy option for short term funding needs and the good thing with these are that you usually won’t need an excellent credit rating; which you would need if you opt for a bank loan.
Friends and family
It is not easy to ask friends and family for help, but if you need some support with your business, it is another option. You might be surprised at how willing your friends and family will be to help you out, especially if they strongly believe in your business. It may be worthwhile giving them some options, in addition to paying back the funds they lend you. For instance, you may be able to pass some work their way in the future or offer them a small share of the business. It is best to use this option carefully and only ask those who you can trust and set up a proper agreement with them for repayment of the loan.
This is a Dragons Den style option, which basically means that you ask companies to provide you with funding and you offer them a share of your business. Angel Funding is one such option; where you register, submit your pitch and then connect with investors. You should make sure you are happy to offer shares of your business though, as this can prove to be quite costly, depending on how much you make.
This is a really popular way of getting funding and involves asking a number of people for investment and usually small amounts. Businesses or individuals who use crowdfunding always offer an incentive for investment, such as samples of the product or the product in its entirety. In some cases, you may also offer small shares in your business.