One thing in business never changes: it takes money to make money. If you’re thinking about starting a business, you’ll need an influx of capital to get your doors open.
Many of the requirements to start a business demand considerable investment, not to mention the ongoing costs of operating your own company. Here are six sources of funding you can use to launch your business.
1. Personal Savings
Many small business owners rely on their personal savings, at least in the startup phase of their business. Unlike a loan, there’s no interest to worry about or a timetable you must repay the loan.
The flipside may be obvious. It’s a well-established fact that small businesses struggle during their early years, and few see their fifth birthday. Never invest more money than you’re prepared to lose, and always discuss the decision with your spouse or family beforehand.
2. Small Business Loans
When you need a significant amount of funding, your surest bet is a small business loan. Loans backed by the U.S. Small Business Association (SBA) are the gold standard of small business loans, though their eligibility requirements tend to be strict.
Along with your application, your lender will likely ask you for a business plan and any other supporting documentation you can provide. These documents demonstrate that you meet the requirements to start a business and have a viable plan for the future.
As a side note, the SBA offers loans tailored for franchise owners, which means that it’s typically easier to obtain funding for a franchise compared to starting a business entirely on your own.
3. Venture Capital and Angel Investors
Depending on your business, you may be able to obtain funding from a third-party who chooses to invest in your business. The SBA has a separate Small Business Investment Company (SBIC) program that helps connect you to private investors who can provide the capital to fund your business.
Be advised that historically, angel investors have favored already-established companies that demonstrate profitability. Still, this may be an avenue to consider when seeking funds to launch your business.
Do you have confidence in your business idea? You might consider tapping into your social network through a crowdfunding website. These sites allow you to solicit online donations, and in return, the donors receive some type of gift, such as early access to your product.
The websites themselves charge a percentage, and your business must fit one of their pre-approved categories. But as long as you use the funds for a legitimate business, crowdfunding can be a great way to gather funds, and it can also be a great way to start building brand awareness.
5. Government Programs
The SBA can connect you to a variety of government grants that can be used when starting a business.
Women, veterans, and minorities have additional resources that they can tap into since these groups have historically been underrepresented in the small business community. Some grants may also be available if you open a business in an economically disadvantaged area.
The great thing about government grants is that they don’t have to be repaid. However, they can often be harder to get than other forms of funding, and they tend to favor businesses and owners from particular backgrounds.
6. Credit Cards
When used sparingly, credit cards can be used to fund your initial business expenses. Because of their high-interest rates, you should generally avoid using credit cards for massive costs, but they can be great for purchasing smaller startup items.
For example, if you need to purchase office supplies, furniture, or small equipment, you can rely on your personal credit card. Naturally, you’ll have to stay on top of your payment schedule; otherwise, the interest can quickly snowball out of control.
Start a Business the Easy Way
With so many requirements to start a business, many entrepreneurs are looking for an easier way. Thankfully, there is one. Opening a franchise is usually much simpler than opening a business entirely on your own. Not only is funding easier to obtain, but there’s considerably less risk when partnering with an established corporation.
Why not see for yourself? Use the franchise locator tool on the Franchise Gator website to find a franchise opportunity in your area. You can combine your entrepreneurial spirit with the solid reputation of one of America’s top brands and reach your full business potential.