In today’s multifaceted world, there are numerous opportunities for the creation of a new business, especially one that surrounds a stellar concept.
Whether you are considering a home-based business or procuring a commercial office/retail space, the following tips will help you get started on financing:
1. Sweat Equity
Many entrepreneurs choose to begin via sweat equity. This means that you will pour your heart and soul into the project for no pay.
For instance, Steve Jobs began Apple out of his parents garage and worked solely on sweat equity. It wasn’t until Jobs and Steve Wazniak caught the attention of Byte Shop founder Paul Terrell, and ultimately begged him to carry the first Apple computer, that they gained funding of any sort.
This may require that you hold a full-time job and work nights and weekends to make your dream take flight. Once you have a product and/or services that can garner a profit, you have the power to take the next step.
2. Credit Cards and Savings
Another option is to leverage your credit and/or savings to buy time. This could mean tapping into your personal credit cards, 401k, IRA, or investment portfolio for funding.
Prior to taking this risk, it is important for you to do the legwork to make sure your concept can actually be profitable. Reach out to a mentor for advice and deeply consider the possible impacts of this decision.
3. Family and Friends
It isn’t uncommon for budding entrepreneurs to sell their friends and family on their project and ask for cash. If this is your chosen source of financing, it is recommended that you deeply consider your relationship with the individual.
Make sure you set parameters on what the lender expects in return, when the money must be paid back, and how you will provide progress reports.
In return for the investment, the lender may require that you pay interest or provide ownership stakes in the company. It is vital that you decide what working relationship will be most beneficial in the long run, as partnerships can be quite challenging for family and friends.
4. KickStarter and Indiegogo
Have a truly innovative product that you want to bring to market? Thanks to the world of social media, you can leverage platforms such as Kickstarter and Indiegogo to raise capital.
For example, say you have developed a chic iPad cover that converts into a hot purse for the evening. You sketch out the design, set a funding goal, and then present to Kickstarter staff via an online application. Once approved, your Kickstarter campaign launches for the world to fund. Amazingly, there are many generous individuals who pay attention and love to fund out-of-the-box ideas, even for innovators they have never met!
When the money is successfully raised, it is considered yearly income and you are required to pay taxes. The other portion can be applied to successfully develop, manufacture, and market your product.
5. Bank Loan
Despite the common story that major banks aren’t loaning money to small business owners, it is possible to gain funding if you can prove that your company is already profitable. This means that you’ve already poured your sweat and tears into your business and are attempting to take it to the next level.
For instance, say you have been running a small communications firm out of your home office, want to move into an office, and hire a couple employees. A small business loan can help you accomplish these objectives.
As you embark on developing your concept and company, don’t be too hard on yourself. Mistakes will be made along the way. It is with perseverance, dedication, and foresight that you will succeed.
Each and every company forms in its own special and unique way. Discover your best path and go for it!