Running a business is an exciting and adventurous occupation, as it gives you independence, variety and potentially a lot of wealth, but it is not without its unique difficulties and challenges.
Financing a business in its startup phase is one of these challenges, as there are usually numerous costs which must be factored in, some of which may be unforeseen. Here are 5 ways to finance a startup business.
It is common for people who are starting a fresh business to have a second job in order to build the funds to finance their operations in the beginning. Whilst many people want the business to be their sole occupation, it often takes time to build a client/customer base and get trade flowing.
Having a secondary job can bring in a bit of regular income which can be invested directly into the business to help it grow and ensure you have some financial security whilst you set up your venture.
One of the simpler financing options would be to take out a loan to fund business operations. This would give you instant access to that all important capital which can get your business going.
Due to the risky nature of startups, however, it can often be tricky to persuade a bank to give you this type of funding. You will need a solid business plan and well considered financial forecasts, as well as good reasons as to why you think your business will be a success.
Private individuals who loan their own money to a startup are known as angel investors, and their terms for the loan are often more generous than those of a bank. You do not need assets to secure against their investment, and they often come from a business background themselves, meaning they can offer helpful advice to startup owners.
They will usually ask for a stake in the business as well, so long term profits could be lessened by this option, but it really comes down to the individual agreement made between entrepreneur and investor.
Another option for those running a startup would be to invest some of their capital in the global markets. This is usually done through an online broker like OANDA, and involves buying and selling assets in order to sell them on for a profit.
It takes time and patience to develop a trading strategy that will make money on a daily basis, but there are longer term investment options (such as gold) which take far less management time than their shorter-term counterparts (such as forex).
Probably the most attractive option yet the most difficult to secure, government grants never need to be paid back, and can often give a business access to more than £100,000 of funding. They are usually offered to specific sectors such as technology, but there are many different types aimed at different businesses.
Like a bank loan, you need to have a well thought out business plan and good justification for why you should get the grant.
These are some of the most popular ways of financing a startup, but there are many other options which could be just as effective. Do your research and find the best one to suit your business.