Your Dream Business: How to Raise Money to Start a Business
There are so many reasons why branching out on your own and starting a business can be a great idea. The independence and satisfaction that can come from being a master of your own employees are second to none. There’s a reason why small business owners are some of the happiest people in the country.
If you’re thinking about starting your dream company, you’ll need to get some serious funds together. It can be hard to know how to raise money to start a business, or even where to start with the process.
If you’re looking for different ways to raise money for your business, read on. We’ll walk you through the different methods you need to know about.
Take out a Loan
If you want to start a small business, you’re likely going to need more money than you personally have in your possession at this very moment. It’s going to take a good amount of funds to get you up and running, and then over time, you’ll be able to work your way into profitability.
That’s the model on which most businesses are founded. You likely will be no different.
In order to get the start-up money that you need, you might want to consider heading to your local bank branch. If you have a strong credit score, the bank might be willing to lend you the money you need to get going. You’ll need to pay it back with interest, of course, but you might be able to get a loan with terms that are amenable to your business plan.
Personal bank loans traditionally come with much lower interest rates than credit cards and other forms of borrowing and are probably the best possible type of money lending you can look into for your business.
However, it is also increasingly difficult to get a bank to agree to give you a loan. You might have to be able to give them some form of collateral in order to get them to agree (like your car or even the right to seize your home). Banks have become highly allergic to risk in the past ten or twenty years, and they might not be willing to take a shot on you.
Hunting for Angel Investors
Angel investor is a term used to describe a very wealthy individual who steps in and funds an entire enterprise. This is the dream of many people who have a small business idea, but not one that often comes true.
For starters, it’s hard to get these people to listen to your idea to begin with. They are likely often bothered by many people with many bad ideas and there’s no reason to think your business proposition is any more worthy than those have come before.
However, if you can get someone to sit down and truly listen to your idea, it can be a huge gamechanger. If they love your idea and want to get involved, you can draft up some paperwork with an attorney and voila!
You’ll have business funding for your new enterprise. The investor, of course, may want to have some say in how things are run or how the business is put together now that the money is on the line. It’s best to talk at great length about what your business is going to entail before accepting any funds from anyone.
It’s essential that you are on the exact same page as your investor before getting going.
Image Credit: SME Loans via Flickr CC 2.0Asking Friends and Family
It can be hard to find someone who will give you money if you don’t have a personal connection with them. That’s why many people realize, after some hunting, that they’d be better served seeing if anyone in their inner circle might seem interested in investing in this new business.
It can be a daunting feeling to realize you might need to ask those that you love for money. It makes the entire affair of starting a business much more difficult, as you’ve put someone else’s money on the line. Stress will be unavoidable, but often this is the only way to get a business going.
If you do break through and your business is a big success, your loved one will be thrilled that they came along for the ride.
It’s unlikely that anyone relative or friend will be able to foot the entire bill for the launch of your company. However, getting a few thousand here and there from two or three people can be enough to get the ball rolling.
You shouldn’t treat your friends and family any differently than you would a professional investor. Have a business plan at the ready as well as a budget, and walk them through exactly where their money is going to be going. Make it clear to them this is a loan and that you will pay them back (unless you’re really looking for an investment or a donation, with no requirement to get them the money back. Up to you!).
How To Raise Money to Start a Business
Do you know how to raise money to start a business? If you have a dream of the perfect company in mind, you’ll certainly need to know how to get the funding together. The info above should serve as a helpful primer in pursuit of this goal.
Need more financial advice, tips, or tricks? For more information, visit our blog at Your Funding Tree here. Thank You!