How to Finance a Small Business

All businesses start with a single idea. When you have a spark of inspiration, nourishing it into a viable business can be one of the best experiences in life. But there’s usually a pretty substantial stumbling block in the way; money. Financing a small business can certainly be an expensive endeavour.

Fortunately, there are several ways to find the funds you need to take the first step of your entrepreneurial journey. Each has their own unique costs and benefits, and it’s important to be informed before you make any decisions, particularly when the stakes are so high.

In this article, we’ll take a closer look at four ways to give your brilliant business idea the financial boost it needs.

Dip into savings

One of the easiest ways to fund a small business is to dip into personal savings. Taking a chunk from your safety net can be problematic in itself, and it’s important to have a plan in place to cover potential losses. However, if an entrepreneur has sufficient cash in their reserves, and it is financially viable to pursue an idea independently, there are huge benefits. Should the business not be as successful as expected, there are no other stakeholders answer to. Equally, if the business idea is successful, the entrepreneur will not need to divide profits with anyone else. As such, this is the least complicated method of financing a small business.

Find an investor

If using personal savings is not an option, an entrepreneur can try to find an investor to help fund their business plan. Depending on the terms of an investment, this can remove the burden on personal financial risk to the business owner. However, entering into an agreement with an investor will also likely incur a loss of absolute control. Most investors will look to own a stake of any business they finance. Of course, they will wish to protect their investment, and may expect to make an input in business decisions. This can be an intimidating prospect, and must be given careful consideration before an agreement is made with an investor.

Open a business credit card account

A business credit card can help a fledgling enterprise to push through periods of financial difficulty, and there are often incentives – such as low interest rates – to take one out. Be very cautious about long-term interest rates, however; these can soon escalate a small debt into a serious problem. Always do your research. For example, check out this review to get started.

Crowdfund online

It’s now easier than ever before to connect with financers around the globe. Crowdfunding an idea will still make an entrepreneur liable to their investors, but not always in the traditional sense. For example, instead of a monetary dividend, entrepreneurs may offer their investors a free product, discount, or associated service.

There are plenty of options when financing a business; make sure to do your research, be realistic, and find a compromise where you can. Good luck!