There are various concern plaguing the mind of a startup entrepreneur, and financing stands out among them. Without a proper financial plan, your business is as vague as daydreams. You may be all enthusiastic and motivated to charm the world with your business idea, but if you don’t plan ahead, especially in the financial aspect of your business, it will soon come crumbling down. Most business owners suggest asking for bank loans as the best, safe bet for entrepreneurs, but this is more of a conventional method that does work, but only when your business actually blows up in a good way.
Here you will find some unconventional, but proven methods that actually work in real life and will surely help you if your case is strong enough. Try these methods if you have start-up:
Proven Effective Means of Financing Startups
The 401(k)s and IRA funds are some of the most easily reachable alternative sources of finance for entrepreneurs. It’s not a great option to utilize your own funds, self-directed ones, for investment in your startup. So why not use other funds that people are willing to lend? If you have the right terms and you can make people believe (if you’re a people’s person that is) in your business and you, then you can effortlessly use their funds.
Purchase order financing: It happens so often with startups that great ideas crash due to lack of financing for supply and meeting customer demands. It is one of the most common issues that startups face, i.e. they can’t fulfil demands as they can’t pay the suppliers. Purchase Order financing agencies pay the suppliers directly so that you can get the products ready and delivered to your customers and pay off later as you go.
One of the most crucial parts, if not the most, of being an entrepreneur is having faith in your business and your investors need to see it. One of the best ways is to finance yourself. As soon as you have an idea you must start saving for your idea. Your investors need to see that you have put your own money in the business to know how sure you are about making a profit. This may sound odd, but most entrepreneurs don’t utilize this and go their own way trying to earn other people’s faith on their idea and making them invest in their business. It’s best that you keep a side part-time job that is not too demanding to save some of your money to invest in your long term goal. When you use your own money it lets you have more control over your business.
Renting your home:
This may sound like not the most non-conventional idea, but actually has a lot of benefit. This option is for those not so keen on taking loans. Renting your house entitles you to a monthly payment which you can save up and utilize on your idea or business.
Look out for grants: Based on where you are located you might be able to take advantage of certain grants. There are a lot of government grants out there that people are not aware of. Find out if you are eligible for such grants and if they will finance your projects. Some grants don’t even require any sort of pay back so you are all safe and secure while trying to set up your business.
Crowdfunding allows like minded people to invest in each other’s ideas via certain websites. This happens with exchange of products or deals and offers and some more advanced transcations are based on shares that the startup is willing to give up to the investors. These sites generally charge you for using them as a platform for funding so be very sure of what you are getting yourself and your business into before jumping into crowdfunding.
Borrowing from friends and family:
All it takes is asking them to have faith in you. This does not have to be your last stand when all else fails. Borrowing from friends, family allows you to have more time flexibility. You may have well documented money borrowed from a friend or family member and pay the back once you hit it off. This not only lets you have a big time window, but also gives you the opportunity to ask people who actually have faith in you and will keep you on the right track in business as you wouldn’t want to let your close ones down.
Use retained profits:
So what is retained profits? After you have successfully sold your first batch of products the profits that you have made instead of keeping that in your bank utilizing it to keep your business going is literally using your retained profits.
These are some of the safest bets an entrepreneur can hope for while trying to finance one’s own business. Most “wannabe” entrepreneurs like to go to venture capitalists at their first go and fail. This is very obvious as venture capitalists only invest in your business once they witness you have a great team that is bringing you some profit on a consistent basis, your track records and more which is really difficult to get when you first start out. Venture capitalists come into use once you start getting accustomed to the game of business and equity.
While going to start up a business of your own, your financial skills will be tested at each step, to overcome that you can easily use one of the aforementioned ways to get people to invest in your ideas. It’s always a good idea to save something to fall back on instead of utilizing all your money at once to fulfil demands. Starting out slow and paying off your debts at the same time will not leave you with much profit at the very first chances, but will result in a secure business over time while letting you have the power of controlling your business more than the investors.