How to finance a small business idea

How to finance a small business idea

Financing a micro business can be considered as one of the most important of every business. Piling up funds sometimes is a tough nut to crack for most entrepreneurs and business owners, as many do not know the various way out to know more in other to financially kick-start their business.

Even though, when it comes to financing a business many people primarily think about obtaining loans from banks, without looking deeply into better options that can be explored. To help you find the best and top financing option for your coming business plan or currently running a business, here is a complete complied guide to help you.

Small business loan

When it comes to mini business loans it is unusual for some business owners to get loan and this may be as an improper knowledge and adequate facilities etc. there are government schemes that provides loans, some companies and some private sectors as the case can be that offer loans to business owners who are in need of financial help to broaden or kick-start their businesses. Getting loans from a bank can be seen as normal financing options and involves scheduling a meeting with local financial institutions(banks) especially the ones that you are already conversant with and do business with and speak about your business strategy to them and their loan services. So, if they offer such services to their customers, they will let you know the necessary procedures to go through in other to obtain the loan. This whole process of obtaining loan from bank until the time of reimbursement probably takes weeks or months depending on the bank. You may as well want to look into obtaining a loan from some online lending platform.

Self-financing

It is probable the easiest way to fund the business you are starting. It is expected that before you kick-start a business to have some funds set out for the business before putting into consideration some methods to get financed for the business. Using your personal funds is the safest and smartest way to start a business. Though one challenging issue with this method is that you will only be limited to the funds you have. A very better idea about self-financing or self-funding is that you will have complete control over the business and also bear the risk all alone.

Business grants

There are many institutions that give grant to small business owners to finance business. And grants are not to be refunded, there are grants made available for categories of people and there are for a specific type of business. Obtaining a business grant may not be as easy as it sounds so you have to spare time to it and make it a continuous effort to find a better, suitable one for you.

Crowdfunding

This is a typical method of raising amounts of funds or finance from a much number of people. These people are not investors, so they don’t expect a return on investing their money or receive a share in the business venture. Crowd funders as part of the contribution to the business expect gifts that may come from the goods that you are planned to sell. The risk is that it is very minimal/little for business owners. Again you alone are in charge of your business, in peradventure your ideas for the business fails, you are not obliged to refund to your funders.

Venture capital or angel investors

This is a type of financing given by investors to micro-businesses who have a big and promising potential. It usually comes from big investors, and other financial institutions and investment banks. However, the business that are looking to go with this strategy should know that venture capital doesn’t always accept monetary form; it can also be given in the form of managerial or technical expertise.

You must know that venture capital is a loan and they bear higher risk for potential higher return.  To a little extent, they at times want to have a seat on board of directors.

Raise funds from family and friends

Many entrepreneurs have raised funds for their business by getting family and friends to invest in the business.  When getting to friends and family for business funds, you have to be careful not to jeopardize your relationship or financial future. Businesses comes with risk which yours is not an exception.  Try to also tell the risk involved in the business and they are possibilities that money may lost. They should prepare for any outcome. You should clearly structure your business and know if you are rendering them equity or a loan.

 

Conclusion

As small business owner, they are many ways out there to finance a business but the mentioned methods are the best ways that has high chances of working for your business. Nevertheless, you need to vehemently put into look the size and nature of your business before settling for any of them.

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