It’s an unfortunate fact that approximately ninety percent of all startups fail within the first year of business. One of the top reasons for such failure is a lack of funds – the company started with some seed money and slow growth depleted the little funds they had. Other reasons that businesses fail is a lack of industry knowledge and inadequate marketing efforts. These gray statistics aren’t meant to deter you from your dreams of becoming a business owner; instead, they are meant to serve as a learning tool so that your business can be one of the ten percent that does succeed with proper funding.
Having great products or innovative services is the obvious first step to becoming a success, the other step is having enough cash on hand. You need to have money in order to make money and this is where business lending companies can show their value. Funds are needed in every stage of the business, from developing to promoting. You will also need money to stock inventory, along with paying the mortgage and insurance, and for those expensive surprises that are bound to show up.
It is highly recommended that every startup write a detailed business plan with financial projections and thorough research on the industry that they are about to embark on. This business plan will educate you on the approximate amount of money that you will need to stay afloat through the sensitive first year of business. To write a quality business plan, you can contact your local small business administrator for assistance. Below are five ways you can fund your new business once you have determined how much money is needed.
5 Effective Ways to Fund your Startup:
Take out a loan: There is a certain amount of anxiety that often accompanies the thought of taking out a loan, however, borrowing money doesn’t have to be so daunting. Taking out a loan to fund your startup is an investment in your future and a sign that you have confidence in your business. You know that this loan is going to help you succeed and you know that you will be able to pay it off in full before the time due. Traditional bank loans can be hard to secure because many banks have advanced requirements that the average person can not produce. However, seeking a loan is much more attainable because the requirements are basic: having an open checking account and viable source of income, etc.
Crowdfund: Crowdfunding is another great way to fund your startup – it plays on the concept that every little bit helps. For example, if one hundred people each gives you five dollars then that would translate to five hundred dollars towards your business. There are many secure crowdfunding websites that you can join and ask your family and friends to pitch in.
Credit cards: Having a business credit card is essential for those emergencies that will come. You should shop around for credit cards with low-interest rates and great reward programs. Additionally, having an active business credit card is important for building a healthy business credit so that more funding opportunities can open up in the future.
Personal finances: Using your personal finances such as money from your savings is another sign of business confidence. Use this money to help build your business with the knowledge that you will be able to replenish your saving account in the future with more money than there was before.
Work: Tending to your own business is going to be a 24 hour a day job, however, in the beginning you may also have to keep another job on the side. You can find a low-duty part-time job or freelance on the side until you are confident that your business can stand on its own two feet.
You have the ability to create a successful business. You just have to start with a buzz-worthy product or service, confidence and knowledge of your industry and enough money to fund you through your freshman years.