Having a clear vision and passion for your business is brilliant, and will keep you motivated to succeed. However you’ll still have bills to pay, and food to put on the table and petrol in the car whilst you’re growing an income from your new ideas.
What options have you thought about for ways to fund your business?
5 ways to fund your business
- Your Savings: It’s likely you’ve got some savings somewhere you can use to help you get your idea moving, or your business growing. You can either use your savings to fund your business growth, or to pay yourself whilst you’re not earning from the business.
Benefit: You’re in total control and have a fixed amount available for your business growth
Risk: You may use up all your savings and have nothing left for future opportunities for your personal use.
- Credit card: Using a credit card for buying equipment and stock, or funding this growth phase of your business can be a useful way to fund your business. You will need to limit yourself to the amount you want to spend this way, especially if you have a high limit on this card.
Benefit: You can keep track of your spending on this aspect of your business growth, keeping all the spending in one place. You don’t need to have savings to develop your idea
Risk: You’re paying interest on everything you don’t pay back each month, which increases the cost of developing your new project. You may feel you’ve got more available than is sensible to use on the project at this stage and risk growing debt you may not be able to quickly pay back.
- Loan: Whether this is a business loan or personal loan, (this may depend on your business structure), a loan is a fixed amount you borrow over a fixed period of time. You pay back the loan at a fixed rate each month.
Benefit: You have a finite amount of money for developing your idea, with a clear repayment plan in place. If you’ve done your figures well, you’ll know that you can afford to pay back the loan with the growth of the income you’ve got coming in for the new part of your business.
Risk: If your expected income is less than expected you may struggle to re-pay the loan, which may put you in a difficult financial position.
- Investor: You may want to bring in a partner with money to invest in your passion to grow your business. There may be someone you’d like to work with who has a similar vision to you and you can complement each other to develop this idea.
Benefit: Income which directly benefits the growth of your business idea. A partner to work with to develop your ideas into a growing business. The money is available solely for business growth.
Risk: You may not have full control of the direction of the business depending on the agreement you come to with your partner/investor.
- Crowd funding: Crowdfunding enables you to get funds from a group of interested people who are keen to see your idea become a reality. It can be a great way to promote your idea to the market and get support for what you’re wanting to achieve. It can also show you how many people would be interested in buying your product or service and a way of getting feedback from your ideal customers as you put your ideas into action.
Benefit: Money to develop your idea into a business with no need to re-pay investors the capital back. Feedback from the market place on growing your passion.
Risk: It may prove to difficult to get sufficient funds to grow your idea. If you need all the money to be able to grow your idea, you won’t be able to start your project.
Which method of raising funds for your business idea will suit you, your business and the stage of development you’re at?
If you need help working out what’s best for you, book an explore call with Tracey-Jane to talk things through.
What ways to fund your business growth have you used or considered. What advice would you give others? Leave your comments below.