15 tips to getting money for your business
One of the biggest difficulties for entrepreneurs is finding funding to start a business. So where can you get money to start a business? Here are 15 tips on how to raise money to start a new business.
When you calculate the cost of starting a business and add to that the amount you need to cover personal expenses in the beginning, raising money for a business can seem like an impossible task. Figuring out how to raise money to start a business is one of the first challenges most aspiring entrepreneurs face.
Yet hundreds of thousands of individuals each year find the money to start a business. How do they do it? And more importantly, how can you raise funds for your new business? Consider these funding solutions for budding entrepreneurs. Some of them are almost risk-free. Others carry significant financial risk and should be used with caution.
15 tips to get money to start a business
If you have a good idea, but don’t have the funding to implement it, you need to get it somehow. So I’ve put together 15 tips on how to raise money for your project. I believe that you will definitely choose some of them and that your project will succeed!
When you need money to start a business, reach for your own savings first. Depending on how much money you need to start your business, you can use your own savings, an inheritance or part of your disposable income. However, make sure that any money you invest in the new business is actually “disposable”. There is always a risk that your business will not be successful, so it would not be advisable to invest all your savings for retirement or other money that you expect to need in the future. You should also be sure that you have enough money set aside to handle unexpected expenses such as repairs to household appliances, cars and the like. You should also devote your time to learning how to start a business the right way.
Do not live wastefully
By partially limiting your personal expenses, you can get some of the funds you need to start your business. Of course, you don’t have to live like a pauper or waste hours looking for minimum discount coupons to live frugally. A few simple changes can save you hundreds of dollars a month. Do you go out to lunch at a restaurant every day? Add up how much you spend that way in a month. Do you frequent coffee shops? No matter how much coffee you drink, making it at home or at the office instead of buying it at Starbucks can save you up to $20 a week. Bringing your lunch to work instead of ordering in can save you another $30 or more per week. Eating a home-cooked meal instead of ordering in, eating out, or carrying fast food home can save you an additional $30 or $40 a week, plus the tips you would have given to waiters or delivery people. By limiting impulse purchases and buying unnecessary items, you can save even more.
If you have good credit, this is the easiest way to get money to start a business. You can use a credit card to buy equipment, supplies, advertising or even pay for postage. And if your credit card gives you a line of credit, you can take out an instant loan (up to your credit limit). Using a credit card to start a business, however, carries some significant risks. Interest rates on credit cards range from around 13% to 20% or more, so if you don’t pay off the balance each month, you can quickly run up a huge credit card bill. You will be responsible for paying off the debt whether your business is successful or not… So think carefully.
If you need a steady source of income to meet your financial obligations and provide for your family, set up a part-time business. Don’t quit your day job until the part-time business has a steady stream of customers and profits. This way you will find out if you really enjoy the business and are good at it, if not, you have nothing to lose.
If the business you want to start can’t be run part-time, or if it still requires more money than you have, take on a part-time job alongside your full-time job. Set aside your part-time income until you have saved enough money to start your own business.
Business from home
If you work from home and don’t have to foot the bill for renting office space, you can start a business with no money. According to the September 2019 U.S. Small Business Administration Office of Advocacy FAQs, 60.1% of all businesses without paid employees are based on working from home, as are 23.3% of small employer businesses. Running a business from home (if you can) can save you a lot of money that you can put to different and better use.
Don’t stock up
Money invested in stocks is cash you don’t have available for other needs. To minimize the need for initial financing, buy as few shares as possible until you know how quickly the stock actually sells. Depending on what you plan to sell, you can use a mail-order service that will custom-make your products and ship them directly to customers. For example, there are a number of drop shipping companies that will print your custom designs on t-shirts, coffee mugs, smartphone covers and other items and then send them to the customer under your business name. Using one of these can give you an inexpensive way to test and sell your products. If you have a different type of product in mind, check with the manufacturers to see if they will drop ship for you. Once you know what sells best, you can see if it would be more cost-effective to keep the inventory and ship it yourself.
Get advance commitments for work
If you want to raise money to start a business, secure one or two business resources before you start. Former employers, if they have left on good terms, are often a source of work for budding entrepreneurs or sometimes of funds. Large companies can also provide an initial supply of work and income by sending you their excess work or small jobs they don’t want to do.
Rent instead of buying
If you don’t have a lot of money to spend on tools and equipment – or you’re not sure how much you’ll need a particular item – look into renting what you need as needed. There are places where you can rent everything from power tools to excavators. Then, when cash comes into the business, only buy items that the business uses regularly. You can save a lot of money in the beginning, and you won’t have to stress about big investments.
Used instead of new
Sure, it’s nice to start a business with shiny new equipment, desks and filing cabinets. But buying used items can save you a considerable amount of money. Keep an eye out for advertisements on various websites and in local newspapers for closeout notices. Local garage- and “moving” sales can also be a source of inexpensive items to use.
To obtain a business loan, you must provide the bank with information that includes: the purpose of the loan, projected balance sheet at the start-up date (new businesses), details of the lease agreement, the amount of the owner(s)’ investment in the business, projected income, expenses and cash flow, signed personal financial statements and your resume. You may also need a formal business plan. If you are applying for financing to expand an existing business, you will also need the business’s financial statements for the past three years and information on debts, liabilities and outstanding receivables. However, don’t be surprised if the bank turns you down. Banks are often reluctant to lend money to start-up businesses.
Borrow from family and friends
F&F are a common source of funding for small business start-ups. Remember, though, that you have to live with your family for a long time – and you probably want to stay friends with your friends. So don’t borrow unless you have a business plan and have done enough research to know that there is a market for what you want to sell. Present them with your business plan and convince them that it is a sound investment that may even earn them a little money.
Angel investor groups
If your business has real potential for significant growth, look for these groups in your area. Your local SBDC or SCORE office can advise you on how to contact a group in your area. You will need a business plan and you will need to be able to demonstrate that you have experience in running a business and that the business will make enough money to give investors a nice return on their investment.
Microloans are small loans available from a variety of sources, including community sources, online lenders and peer-to-peer lending groups. Loan amounts, eligibility, interest rates and terms vary from source to source. For more information about micro-loans and lenders, visit our microloans page.
Crowdfunding sites allow you to raise small amounts of money from many people if you can get them interested in your project or business. One caveat: Remember that crowdfunding publishes an idea for a product or service for your business. If you need to keep your super-innovative idea a secret, don’t use crowdfunding. Consult an intellectual property lawyer before you publish anything that is unique and potentially patentable.
Tips I can give for launching a start-up
But don’t forget about offline opportunities either. Step away from the computer put down the smartphone and seek out people in real life at conferences and networking events. The connection you can make with a person face-to-face is inherently stronger than the connection mediated between screens. And of course, don’t forget a professional business card to turn the meeting into a relationship.
Negotiate everything. Whenever someone offers you a price, remember that a healthy portion of it is the profit margin. Can you reduce that margin to your advantage? You won’t always be able to negotiate a discount, but it pays to remember one of life’s most important rules: if you don’t ask, you don’t get.
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