Many people really like the idea of running their own business. It might be that they want the opportunity to be their own boss, they feel they can do a good job, they want to work from home or they think it will make them lots of money. Whatever the reason, the business will need to be set up and this will cost money. Some businesses will only cost a small amount but others will need a lot of money. It is worth thinking about different methods of funding so that you can decide which will be the best for your business.
Use your savings – you may have some savings that you will be able to use. You might decide to lend that money to the business or donate it. If you want to lend it then you will need to decide whether you want to charge the business interest like a bank would and whether this is allowed and investigate any legalities that you need to be aware of if you do this. It is worth considering how you will manage without this money and if you never get repaid or have to wait a long time to be repaid whether this will suit you.
Use a loan – it is possible to use a loan to fund a business and many lenders will have a business loan option. You will need to put together a business plan and use that to show to a lender so that they can decide whether they are interested in lending you money. It is often tempting to make the business plan seem more positive so that they are more likely to lend. However, you do need to be realistic as you need to be sure that you will be able to repay the loan. It is very possible that the lender might want you to use your home as collateral on the loan so that they have something to back it up if you are unable to earn enough to repay. Although it is a loan for a business they may want a family home to be used if the business has no assets. It is wise to make sure that you are confident that things will work out and that you will be able to manage the loan repayments. If you are risking losing your home then you need to be really careful. Even if you do not have any collateral you still want to avoid leaving the loan unpaid as it will still show on your personal credit rating and could mean that you will struggle to borrow any more money.
Crowdfund – crowdfunding is a modern idea where people raise money for different things in return for something. For example, if you were setting up a café you could ask for donations in return for a meal or drink. The reward needs to be appealing to the donators but you have to ensure that you will still make enough money so that you can go ahead with the business purchases that you need to make. These are more often used for charitable or good causes rather than general businesses so it may depend on what you are planning on doing as to whether it will be a good option for you.
Ask friends and family – Some people might decide to ask their friends and family to help them. Obviously not everyone will have the money available to help but they might have ideas or be able to contribute other things that would be helpful. It can be fun to get people you know involved if they are enthusiastic but it is very likely that you will not be able to pay them, certainly not to start with and maybe not at all and so they will need to have an understanding of that. They might be keen to help anyway.
Earn the money – Of course you could also earn the money as you go along. For example, if you worked full-time, you could run the business in your spare time using some of the money you made to finance it. Or if you could afford to, you could work just part-time. You will have to work out how much money you need to live off and how much money you need for the business to come up with a plan that will work for both.
These are just a few ideas and there are probably many more that could come up if you had a good think about it. It is good to think about which might be the best for you and your business. IT could be that you will be looking at a combination of different methods in order to come up with the best possible solution.