Are you thinking about taking your career to the next level?
More and more millennials are choosing to take their careers into their own hands.
But if you have a small business idea that could be a money generator, you still have to figure out how to turn it into a profitable business.
Whether your small business is in technology, gaming, hospitality, retail, or construction, you might be tempted to use your own savings or borrow money from family and friends – to start and eventually grow your business.
However, this carries many personal risks and can cause problems later in your development.
On the other hand, you can raise capital for any stage of your company’s development by looking at your options for funding a startup.
How to finance a startup
Millennials, don’t worry. There are ways to make your dreams come true. Financing for your startup idea is possible, even if you are still studying and want to start a business.
Here are the smartest ways to fund your startup.
1) Investment crowdfunding
For many startups, investment crowdfunding can prove to be an invaluable way to raise funds for your business with the best corporate websites like Kickstarter, Seedrs, and Crowdfunder.
Typically, you need to reach out to investors and explain the various benefits of investing in your business by creating articles, videos, and hosting live Q&A.
However, in exchange for their funds, you must offer them equity in your business. This is one way to get the fund to help you pursue your startup aspirations.
2) Peer-to-Peer Lending
Just like real estate crowdfunding, investment crowdfunding, peer-to-peer lending (or credit-based crowdfunding), requires you to reach investors directly through an online platform and can be very useful for both startups and small businesses to be useful.
If you can convince them of the potential of your business idea, they may decide to join a panel of investors that will pool their funds to form an unsecured loan.
Related: How to Find a Business Partner
3) venture capital
Do you need another idea to finance your company? Insertion: Venture capital.
Venture capital works by suggesting a private or corporate investor and offering shares in your company.
To convince them to invest, you need to demonstrate that your business has high growth potential or is currently growing rapidly.
Therefore, you need a well-designed business plan, a brief summary of your activity, a team summary, clear financial projections (cash flow projections, bottom line, business expenses, profits and sales), and a thorough understanding of how much capital to raise.
Before reaching out to investors, however, it is important to assess which sectors they are working with and see if their goals align with your vision. Also, make sure you follow the small business bookkeeping tips so your numbers are correct.
Related: 7 Types Of Insurance You Need To Protect Your Business
Advances differ from loans in that they simply pass on the money your business would ultimately have earned (future earnings).
So if you want to raise money for your small business, you can take advantage of products such as merchant cash advance, sales advance, or invoice finance.
- Dealer’s cash advance: To get an advance on your business, you must submit card-based sales reports (credit and debit card) for the past 3 or more consecutive months. This allows lenders to calculate your average card-based sales. So, if you’re regularly making around $ 25,000 a month in card sales, the advance you get could be in the same region. The best part is that even if you are a small business owner with poor credit, you can get a cash advance on the merchant.
- Income advance: Although similar to a merchant cash advance, a sales advance takes into account your company’s total monthly revenue streams (card and cash).
- Invoice financing: If your company is able to trade business-to-business invoices worth more than $ 5,000, you can free up up to 90% of the capital on them by applying for a short-term Invoice Finance contract. Once the debtor has paid the bill in full, the lender will release a balance (e.g. the remaining 10%) minus costs and fees to your business.
Related: 11 Steps to Starting Your Own Business
5) Business Loans
Another way to fund a startup is through startup corporate loans. You may be eligible if your startup has been around for at least a year and is already making money.
Fundera is an excellent online marketplace for small businesses looking for financial support. Fundera offers useful guides and tools to simplify the financing process, as well as a quick loan application process and several loan alternatives.
- Time in business: 1+ years
- Monthly income: $ 25,000 +
- Minimum credit point: 680
Business loans are usually secured or unsecured and can be invaluable in providing a large lump sum for small and established businesses.
However, in order to make an informed decision, you need to understand how they differ and what it means for your business.
- Unsecured business loans: You can borrow between $ 5,000 and $ 250,000 without compromising unencumbered assets (equipment, machinery, vehicles, and property). However, due to the level of risk to which the lender is exposed, unsecured contracts are often subject to stricter lending criteria and carry higher interest rates (compared to secured contracts). However, this remains a very useful option if you are not currently a homeowner.
- Secured business loans: On the other hand, a secured product could allow you to borrow between $ 5,000 and $ 1,000,000. This time, you need to provide security to the lender with your unencumbered assets. While this may allow you to raise more capital, you run the risk of repossession of your assets if your company no longer considers the fixed monthly repayment.
In most cases, banks are simply not ready to provide business loans if you have no business history or no profit. If you’ve been rejected or delayed by traditional banks, alternative business finance is the way to go.
Related: How to Start a Micro Business in 6 Easy Steps
Ready to start your own business? Get it!
Starting your own business can be very intimidating.
Not only do you need to create an effective business plan and get your basic day-to-day operations in order, but you also need to make sure that you are in a position to support your company’s growth.
Fortunately, these options can help in funding a startup because you have access to a wide range of funding solutions to finance your startup.