Ways to Finance a Startup
There is a difference between tough times, which everyone goes through, and bad money management, which hopefully you won’t go through.
Tough times never last but bad money management is disastrous. Take charge of your finances and watch your business succeed.
The first concern is that do you have enough money right now, do you have skills, knowledge, experience, and all those things because that's what matters.
When it comes to financing your business in the first place, there is no point in raising capital if you don't have the skills, experience, and know-how. You need to gain these things first and if you do that then you will need the rest.
Before you contact a lender, answer the following questions:
- How are you going to use the startup funds?
- How much money do you need?
- What will be the return on investment (ROI)?
Calculate how much you can afford to pay each month.
Finance your business:
If you have a business plan and you have something in place that will grow and can generate profits in the long run and a promising opportunity then you can ask investors for the funds.
To do this you have to understand that what investors think. Investors need profit and investors need to make an intelligent decision, what that means is that you need an approving business plan, you need a strategy, marketing sales plan and other supplements for there consent to startup.
You can use the loan calculator in the suggested references.
How to get investors:
With that in place, it is necessary to prove to them that you know exactly what you're doing, you've got to ask yourself why would an investor want to give his money. What is it that, you do differently that other people don't.
No one is going to throw wealth at you, if you don't have any proven experience, without showing anything on paper. There is no way they're ever going to give you the money.
But if you come up with the business plan. If you come with experience, if you sound like you know what you're doing and you look like the person who has the potential to grow their business then those investors will invest in your business plan.
Borrow money to make money:
There are many kinds of benefits that you can borrow. You can borrow money from your family, you can take a loan from the bank, you can use credit cards but either way, you've got to understand that money has to be paid back.
When it comes to borrowing money you have to understand how credit works. Yes, there is a payback period, whether it is 5 years, 10 years, or 20 years, etc. You've got to pay back that and yes there is the interest rate, it maybe 5% maybe 10% but either way you've got to pay the interest and guess when you borrow money there is a very little timeframe in which we have to payback.
In history, many entrepreneurs borrowed money to make money from their parents, banks, and credit cards in order to make their business happen.
Collaboration in business:
You will be able to grow your business in the future and gain more capital if you collaborate. The third way out is to collaborate, maybe there are people in your life that are unable to give you money but they want to give you some time there experience or knowledge maybe they have some resources that you can use. You need to understand that, collaboration is a great way to start a business.
A friend of mine really wanted to start a business but all he had saved was the $10,000. He needed $40,000 in total. The question was where would he get the extra $30,000. He had a very supportive sister and his three friends stepped up. They gave money that he needed and also gave the time, experience, and the knowledge necessary to help that business.
Do you have some people in your life that have the same vision and values? If you do then you need to write them a letter, pay them a visit or give them a card. Because you can have mutual consent on business matters.
This sometimes could be the longest way because you see, if you can find a way to save up a certain amount of money. Then you can eventually use that saving to invest in your business expansion, unlike people who start a business but don't save at all.
I think one needs to write down all the expenses that you want to make for the business. What you need to understand is that not everything needs to be bought at once, sometimes purchases could be delayed.
Some purchases could be discarded and you can find them for a bargain at other markets. Some purchases could be borrowed by collaboration and you don't have to pay.
Let me give an example of a friend of mine who wants to start a YouTube channel and he had in his mind that he needed $50,000 in order to grow a successful YouTube channel. He wants the most expensive camera, expensive advertising budget, and an expensive PR firm but he didn't need all. All he needed was an iPhone and some good camera lighting, so he can start his YouTube channel, and all of that cost less than $1000.
Basically, the question is do you need 50,000 dollars or do you need only 1000 dollars. What's really important is that you need to start, you don't have to keep on delaying by thinking that you don't have enough money.
Educate yourself on important statements
1. Cash flow statement will measure your investments, operating and financing activities.
2. Income statement shows how much revenue you’ve earned in a certain time period.
3. Balance sheet concerns your assets, liabilities, and equity.
4. Statement of shareholders’ equity discusses the amounts that the company is financed by way of common and preferred shares.
Things to sell to make money fast:
One another source of finance to win the game or capital in your business is by selling your possessions.
Sell old books and games on Amazon, Extra car, PlayStation, etc. So you can liquidate and put that money back into your business.
Because that's what you're gonna be putting most of your time into. If you look around your redundant possessions, you may find so many things that you can sell.
Maybe your furniture, fish aquarium, your extra bedroom set whatever it is, you can sell it so you can grow your business. Sometimes it's hard to do that but this is a necessary step many people need to take in order to get started.
Determining the adequate financing alternative could be a big deal for you and it could be having a long-lasting impact on the way your business would be running. You must not completely give up the idea of mixing both equity and debt financing depending on your precise requirements at the time, a lot of businesses could be using both.
1. Posted by Ammar Ali, Abdul Majid. (2010). 4 Types of Financial Statements. Retrieved on May 20, 2020 from: accounting-simplified.com.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2020 Mohsin