Is a Loan Your Only Option for Starting a Business?

So, you have a fantastic idea and want to get started running your own business, being your own boss and making your own way in the world! The trouble is you don’t have the capital you need to start your new venture. There are lots of people with a good entrepreneurial idea and the drive to make it work, but who are stopped by the fact they don’t have the money they need to get their enterprise off of the ground.

Of course, some are able to convince their bank to lend them the money in the form of a business loan. If you can find a loan that offers good value, use a loan calculator, for example, the loan calculator at 118118money.com/money-guidance/financial-tools/loan-calculator/ to see if this is a good option. However, you do, of course, need your business to be successful fairly quickly to repay the loan, and also, as the loan calculator will show, there will be a cost to it that is fair but will also take a bite out of your future profits.

So, is there another way you could raise funds to start your new business, which does not have the same drawbacks as a business loan from a major bank? Well, while this depends a lot on your idea and the options you have open to you, but in many cases, the answer is yes.

Consider Crowdfunding

One very strong option for people with a good idea is crowd funding. This is where you run a campaign that promotes what you are trying to do and asks people to donate to your cause in return for rewards, for instance, limited edition stuff or even just the product itself. This works well if your idea is something that captures people’s imagination, and usually is only something you can do if your business idea has an end product. If you want to develop a video game or create a gadget you’ve invented, then crowdfunding can work very well for you.

However, to run a successful crowdfunding campaign, you do have to devote a lot of time to marketing, and it doesn’t necessarily work for less project or product-based business ideas. The benefit of it is that you don’t have to pay the money back or give your investors shares in your company; you simply have to give them what you promised in terms of rewards for supporting you.

Venture Capital

Another option if your idea is something unique and interesting is to seek help from venture capitalists or angel investors. These are people who do the ‘Dragon’s Den’ thing for real and give money to people with good ideas that they believe will recoup their investment and more. This can mean giving up part of your business or making certain agreements. However, it can also net you the capital you need.

You will need to be able to present solid market research that proves your business has the potential to make a profit and also show a good business plan, but these are all things you should really be doing anyway if you are serious about your start-up idea.

Bring in a Partner

Another way you can raise money for a business venture is by partnering with someone. Of course, this will affect the direction your business takes and means splitting profits in an agreed way or offering certain things to your partner’s business, but it will also provide funds without having to look at a loan calculator to work out what you can get and how much it will cost you.

Taking on a partner can also be a wise move, as you can build strong relationships with them and their own network that will help you in the early days of your own business. You may have someone you already know who would be interested in coming on board in this way, or you can network and find somebody suitable.

Get Investment from Family or Friends

A final option is to ask for money from people you know, who may wish to invest in your business. Whether this is in the form of a loan or buying a share of your business, you can generally make these arrangements quite casually and repayment arrangements won’t be as a strict as with a bank. You can also enjoy getting the people who know you on board with what you are trying to do and their support could be very motivational.

Ultimately, a bank loan is often a good choice for starting a business. However, depending on your idea and who you know, you may find you can get your capital in a cheaper and more flexible way by using things like crowdfunding, angel investors, or even just people who are already on your side.



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