Being an entrepreneur can prove to be a very rewarding field to get into. You will be addressing a prominent want or need in society and it can serve as an extra source of income. However, if you are thinking about becoming an entrepreneur, it is highly likely that you will come across one common saying. It takes money to make money.
If you want to become profitable to start any business, you have to have a source of capital to fund any expenses that you will be needing to get it off the ground. Wherever this comes from, it has to suffice to cover what you will be needing to explore certain ventures. If you are lacking in this area, your business is bound to fail before it can even get started. Many novices are also unaware of some of the best resources to get funding for entrepreneurs. Finding yourself in this quandary can be bad for any business, so follow these tips to avoid this situation.
Bootstrapping
One such phrase you may hear in order to become successful on your own is to pick yourself up by your own bootstraps. While this funding source isn’t quite like that phrase, there are some similarities to keep in mind.
Before determining whether or not you require outside funding sources to finance your expenses, many entrepreneurs use bootstrapping as a way to grow their business without having to relinquish any control to potential investors. Bootstrapping is essentially the ability to use resources to expand the number of resources that you have. Bootstrapping will entail specific behaviors as well.
These behaviors include using funds from your own savings account, opting to do it yourself instead of hiring professionals and not spending more than what the current cash flow of your business permits. Entrepreneurs who bootstrap also tend to have more creativity and resourcefulness, traits that are necessary for any business endeavor. For personal finances, you can consult Clay Advisors for valuable resources.
Bank Loans
If you have expanded your search to outside methods, traditional bank loans may be the first place to look. Banks have the capacity to provide a wide variety of lending options for business owners, big or small. Certain banks also have options for long-term financing.
Of course, while the banks have the ability to provide you with the financing that you may need, it is typically contingent upon your ability to repay the funds plus the interest. You have the ability to leverage certain assets, properties and your personal home as collateral for the loan given to you in certain situations. Business loans are more readily available for you through local or community banks.
Another advantage that you have in applying for loans from community banks is that they have a higher rate of loan approval because you haven’t had a chance to prove your creditworthiness yet.
Crowdfunding
Another unique way for you to fund your business is crowdfunding. Crowdfunding is when multiple individuals pool their money together for a common goal. There are also different kinds of crowdfunding services to consider.
There are a number of benefits that come with crowdfunding as well. First, it’s more efficient than traditional fundraising because it saves you the trouble of having to prepare a loan application or seeking out investors yourself. Here, you can just put yourself out there.
Also, there is a dual benefit in that crowdfunding can serve as media exposure and marketing at the same time. More press coverage will mean more eyes will be on your business, which creates the potential for more customers. A successful crowdfunding campaign is one of the easiest and greatest ways to create interest in potential investors.
Business Credit Cards
A report that was conducted by the Small Business Administration found that one of the most common sources of funding chosen by entrepreneurs is business credit cards. Approximately 7% of capital for startups originate from some form of credit card.
Credit cards do come with high interest rates attached to them, although you will be able to qualify for lower interest rates with good credit. You can follow Clay Advisors for more valuable information on that. The majority of businesses in the United States are owned by sole-proprietors, and business or personal credit cards are used to fund expenses to start any venture.
Using credit cards as a funding medium is a popular choice despite some of the risks attached, because some come with cashback and points that can be used towards certain rewards. Utilizing a credit card is also a great way to track the expenses that your business has because any transactions will be listed on your credit statements.
Angel Investors
Finally, angel investors are those who provide capital for businesses in exchange for equity. This is a tactic that the government actually encourages because tax benefits are given to the “angels” to offset some of the risks.
Funding from an angel is a much quicker process than traditional loans. One of the downsides to consider, however, is that angel investors can be difficult to find. One of the reasons why this is the case is because angel investors are typically in professional fields such as law, medicine, and business. They have access to large amounts of capital, and they are some of the most reliable individuals to have funds readily available.
However, you must remember that angel investors operate under a quid pro quo system. If they give you the capital you need for your business, they will require some equity percentage. Depending on how much you need, you may have to be willing to relinquish as much as half equity in total. Use angel investors if you happen to be down on your luck and little options are available.
