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REDDITGreat ideas can translate into profitable opportunities, provided you do your homework correctly. Budding entrepreneurs are fully aware of the time, effort and expense that must be invested in a new business. It is the latter element which creates tremendous consternation among business owners – where do you get the money to start a new business?
What is challenge #1 when starting a new business?
Most people are prepared to jump into a new venture, provided they don’t have to risk any personal capital to get it off the ground. Unfortunately, capital greases the wheels of a business and keeps it running throughout its lifespan. When you start a new business, you must be fully prepared to forgo the comfort and certainty of a salary, perhaps even a revenue stream for quite some time. Many people can accept that, but the challenge remains: Where to get the startup capital?
At first glance, this may appear to be an insurmountable problem. Luckily, many entrepreneurs have trodden the same path with no startup capital of their own to invest in their grand ideas. The trick to building a successful business is using other people’s money to get you operation up and running. Provided you have laid out a strategic blueprint, you can certainly grow a business from the bottom up with virtually no personal funds invested.
What sort of fees and expenses will your business face?
This question is about as broad ranging as it gets. Each business is unique. The fees, costs, and expenses of running a business vary dramatically. Nonetheless, there are certain fees and expenses that are common to many businesses such as renting office space, stationery, and equipment, permits and licenses, subscriptions, associations and memberships, and daily operating expenses. Then of course there are human capital requirements – freelancers, employees, and contractors. You can certainly lower your overall expenses by maximizing the efficiency of your existing resources. The other route is to increase your capital resources from other channels.
How to get funding for your business?
The literature on business funding is extensive. There are multiple resources you can use to acquire the necessary seed capital for your business. One of the most common ways to acquire funds is through outsourcing. This method of funding taps into potential money sources such as loans, government grants and venture capitalists. A new age way of funding business ventures, particularly tech startups is crowdfunding. This method taps into the vast network of individuals who pool their resources together to fund exciting new business ideas. Of course, you can always approach family members and friends for funding, but this may sour your personal relationships if the business goes bad.
Many people invariably turn to bank loans if their credit is favourable. Non-bank loans are certainly equally popular with people who may have less than favourable credit scores. When you are in the process of applying for business loans, be sure to have a clearly formulated goal in mind. Typical SBA loans can run from $5,000 up to $5 million, with terms ranging from 5 years to 25 years. If you’re looking for a term loan, you can raise between $25,000 and $500,000 over 1-5 years at higher interest rates (7% – 30%). These loans can be approved in just 2 days. Many businesses require financing to fund equipment purchases. While interest rates are a little higher with equipment financing loans (8% – 30%), they can be expedited within 2 days. There are many other forms of business loans available to clients, including business lines of credit ($10,000 – $1 million) over a term of 6 months to 5 years, with approval/denial within 1 day.
The beauty of using any of the loan options is that you may not have to risk much of your personal finances at all. It pays to be as efficient as possible with a new business venture. Start small and maximize each resource to the full. Seed capital and cash flow is essential to the successful running of a business. It shouldn’t be an impediment to getting started!
