It’s an unfortunate fact of life that when you have a great idea for a business, you need money to make it a reality. Many startups don’t ever make it past the planning stages, and while there can be a number of reasons for this – overly hostile competition, for example, or bad management – money is one of the top reasons. The simple fact is that if your business doesn’t have the right funding to succeed, then you’re going to struggle to establish a foothold for yourself in your industry. Luckily, there are almost always places you can go if you want to get funding. Here’s what to do when you need business financing.
The first thing you should do is seek out a business loan. There are several companies and lenders who will provide financing specifically tailored for the needs of your business. If you decide to take this route, be prepared to answer a lot of questions about your business; you’ll need to have a concrete plan in place, know your hiring structure and general operational procedures off by heart, and have a robust idea of what your future is going to look like. Lenders won’t just give business loans to anyone, so you’ll need to prove that you’re worth their time.
Some people decide to finance their business ideas using a personal loan rather than going the business route. This can work if your idea is particularly risky, or if there are some particulars you haven’t quite worked out yet. One of the best ways to finance your business personally is to take out a second mortgage loan; this means you’re likely to get a significant amount of money, and although it will be secured against your property, this shouldn’t be an issue if you’re a homeowner and you’re confident you can pay the loan back.
If you truly believe in your business idea, you might consider petitioning friends and family to help you fund it. Of course, you should only do this if you know they’ve got money to spare; they probably won’t want to fund your venture if they’re struggling financially, so make sure you only approach relatives or friends who you know would be willing and able to provide you with financing. When you’re talking to them, treat it like you would a loan application; tell them exactly what your idea is, how it’s going to be lucrative, and why you think they should help you get it off the ground. Their money and time is precious, after all!
Some types of business are a perfect fit for crowdfunding. Typically, these businesses tend to be ethically sound, have a quirky and unique idea, and are able to communicate that idea to the public without using excessive business jargon. You might know a few of the big names that got their start via crowdfunding; if MVMT timepieces, PopSocket phone holders, and the Oculus Rift VR device ring a bell, then you’re already familiar with several crowdfunding success stories. Your business may or may not be a good fit for this, but it never hurts to try a campaign; if worse comes to worst, you simply won’t be funded and will have to look elsewhere for your investment.
In the UK, many small businesses are eligible for a number of different small business grants. If your business is a heritage project, for example, you might be eligible for support from the National Lottery Heritage Fund. Alternatively, if you’re seeking to develop something new in your industry, you could look to apply for R&D tax relief. If you’re not based in the UK, then it’s still worth looking up your country’s equivalent of these small business grants, because you could qualify for a lifesaving injection of cash and not even be aware of it. Be sure to research the grants you might be eligible for thoroughly, because you don’t want to miss anything!
This isn’t a tip on how to actually acquire your financing so much as a suggestion for building up to your application. If you’ve got a budget in mind – if you’re able to show exactly how your business will spend the money you’re asking for – then many lenders, including friends and family, will be more amenable to giving it to you. To construct your budget, think about all of the ways in which your business will incur expenses, whether that be staff, rent, or any other overheads. You should then try to factor in your profits, the market’s volatility, and other variable stats. The more you know about your business, the more likely you’ll be to get money.
If at first you don’t succeed, try, try, and try again. So goes the adage, and it’s doubly true for business financing. Many financiers and lenders will be recalcitrant to lend money to you if you’re not a proven entity (which might seem paradoxical, but you’ll find it to be true around the industry). As such, you’re likely to encounter a lot of resistance from lenders, at least initially. Eventually, you’ll find a lender – an angel investor, perhaps, or a peer-to-peer lender – who’s willing to lend you the cash you need for your business to get off the ground. You’ll only get there if you keep up the pressure and keep the applications streaming in, though.