7 Creative Ways to Fund Your Business

Most of us dream big when it comes to earning money. Some even gave up the comfort of having a stable job with monthly pay just to earn more. It’s where the concept of having your own business enters. You’ll have more potential to earn and gain independence in your career. You can be your own boss. This may seem when you conceptualize it, but the greater work lies in bringing your business ideas to life.Fund Your Business

Starting a business needs a lot of factors to consider. What market you want to enter, a feasible location, reliable suppliers, and of course the biggest thing to consider — the money you need to invest.

Money is one of the biggest barriers to creating your own business. Many aspirant entrepreneurs have already designed the business they will pursue, but remains unimplemented because they lack investment money. This article will give you insights on where you could possibly seek financial help to generate the amount of capital you need to invest in your start-up company.

1. Self-Funding

The easiest source of money you can have in order to start your business is the one pulled out from your own pocket. This may not literally mean available cash in hand, but could also be liquidating your assets to generate cash. Liquidating your asset means selling some of your unutilized real properties or chattels to generate money. A business that is internally funded and no outside borrowing is still the general idea when putting up your own.

2. Social Lending

Today’s technology also plays a vital role in looking for funders. Social lending or people/peer to peer lending is an innovated form of lending where a person lends to another person or a business without the intermediary of a bank. This kind of lending matches the lenders with borrowers. The common platform of this is the internet.

Popular social lending companies include Rate Setter (UK-based), Lendoit, SmartyPig, Prosper, and Lending Club.

3. Angel Investors

From the word “Angel” itself, this kind of investors, often rich family and friends who are capable to fund a business, act as your provider and offers capitalization in your prospective business.  Angel investors usually offer more advantageous terms as compared to dealing with other lenders, and are generally focused on helping you stand the business. They compensate the help offered by acquiring partial ownership of the business or a convertible debt.

It also has its pros and cons. The pros of having an angel investor mean that your business is highly feasible and that someone believed you can make your business take off. Having someone trust you with their hard-earned money means you got what it takes to become a successful entrepreneur.

The only downside is that the business will not be completely yours. They may be kind to help you financially, but they are not completely a Good Samaritan who’s willing to give without nothing in return. And because ownership will be divided between you and your angel investor, the profits will likewise be shared between the two of you.

4. Crowdfunding

Crowdfunding is raising money collectively from a large number of people that contributes a relatively small amount to reach the certain money you need to invest in your start-up business. It collects a pool of investors that can finance your business. This is also categorized as a social media era of fundraising.

Crowdfunding best works for entrepreneurs with the known audience with whom he/she will cater to. A classic example is a mobile app developer/website developer where investors support the app/website prior its launching and then get a revenue share once it is launched to the public.

Advantages of using crowdfunding include the following:

  • Not having to worry with a collateral as it does not require any
  • For donated crowdfunding, the money does not need to be repaid
  • You gain wide access to different kinds of investors which includes other countries.

For investors, there are certain considerations to keep in mind before putting your money on any type of crowdfunding investment. Vet crowdfunding platforms or sponsors thoroughly before investing your money. The good news is that there are organizations that provide first-hand reviews of crowdfunding platforms in real estate, e-commerce, and other industries. Read plenty of reviews, and research the platforms on your list to ensure the success of your investment.

5. Personal Loans

If you opt to get financing aid traditionally from the bank and you’re having difficulty being approved for a business loan, then personal loans with low-interest rates might work for you.

Since personal loans rely on your credit score cards, it has a greater potential that you may be granted, as long as have a steady paycheck and first-rate credit score. Loan processing is also faster than other loans and collateral is not an issue.

The only matter you will have to deal with getting a personal loan is having a higher interest rate as compared to loans with required collaterals since personal loans are high-risk loan products of the banks. Higher risks involved also means higher interest rates imputed.

6. Community Bank

It is a depository institution usually owned and operated locally in the area. This works similar to other overseas banks, only the ownership differs.

Banks offer lower interest rates as compared to other lending company. Moreover, it has a wider range of loan packages extending from loan amounts to terms of the loan as well as repayment schemes.

7. IRA Financing

Investment Retirement Account financing in the US is an individual retirement arrangement which provides tax advantages on retirement savings. It is the most accessible funding where the money owner can lend you if the terms are acceptable and they believe in the business’ repayment capacity.

Some advantages of these are that you tend to have more investment options and at the same time minimize fees.

Author Bio:

Erin Fiddler is an online financial consultant for Cash Mart. She works in financing for over 5 years and is an authority on emerging financial services. She also writes on trends in the industry such as consumer lending loans, stock investing, and retirement plans.