Creative ways to fund a small business 

It may be that you have been turned down by your bank for a loan in the past, or perhaps you know that your credit rating may not be as good as it could be and you are worried that your bank will reject your business plan. Whatever the issue is, you are not alone. 

Many entrepreneurs would rather not approach the bank to loan them the money to get their businesses off the ground. The great news is that there are plenty of other options available to you when it comes to raising the finances you need to turn your business dreams into reality. 

Savings

Do you have any savings that you could use to get your business started? Alternatively, once you have had your fantastic business idea, would it be possible to save up for a while before acting on your plans. This is an excellent idea if you only require a small amount of money as you will have the ready capital there when the time comes.

Part-time work

You may not want to wait; a lot of entrepreneurs are somewhat impulsive and keen to act straight away. However, you may want to consider setting up straight away but taking things at a slightly gentler pace. That way, you could keep a part-time or perhaps even a full-time job to pay the bills while you are establishing your business. You may not want to do this forever, but giving yourself a breathing space of a few months can make a great deal of difference.

Friends and family

If the above ideas are not viable options, you may want to ask friends or family for a loan. If they like your business plan, they may only be too happy to help get you started. Of course, this can depend upon how much money you need to start up. This avenue usually works best if you need to borrow a small amount of money as individuals are more likely to be able to lend it to you.

Assets

Do you have any assets against which you could raise money to start your business? Many people remortgage their home or take out finance against a car to get the start-up funds. This can be a risky decision because if your business fails, you could also lose the asset you have financed.

Microloans

You can apply for a microloan quite easily. These providers provide loans to small scale businesses if the entrepreneur is unlikely to get the money elsewhere.

Crowdfunding

This can be managed online. The platforms aim to put entrepreneurs together with people who have the money to invest in start-up ventures. This can be valuable because it attracts attention to your business as well as providing you with the funds you need to start it. They usually charge a fixed rate of interest which is helpful as you will know how much you have to pay back every month. You will need to pitch your business online, so make sure that you have an excellent business plan ready before you start.

Once you have started your business

Once you have found the start-up costs and set up the business, the next thing you will have to worry about is how to find the money to pay the bills and suppliers every month. This can be where entrepreneurs come unstuck. Many new businesses fail, not because of the person running them, but because other companies or individuals do not always settle their bills on time. 

This can leave you in financial difficulties, especially if you have only just started trading. However, there are ways to structure your finances which could help you a great deal in the early stages.

Vendor financing

This means paying the suppliers once you have sold the goods. This extends the usual 30-day payment terms and means that you will have the money to pay your suppliers. It is well worth asking if vendors will do this for you. After all, it is in their best interest to keep you coming back to them. Helping you out now could be beneficial to their businesses over time.

Customers

Many businesses ask their customers for full or part payment upfront. This is usually acceptable if you are working for an individual or another small business. Larger companies might turn down your request, but it is still worth asking them. This will enable you to pay for the tools and materials for the job you are working on, and you will not have to wait for the payment to cover your costs. 

Purchase order financing

Once your business has been running for a while and you have started to build up a good reputation, you may be hired to do your first big job. This can worry some entrepreneurs as a big job usually has a more significant outlay and is more time consuming to do. Sometimes this can cause problems when it comes to getting paid.

Help is at hand, however, in the form of purchase order financing. These are finance agreements that you can set up with specialist loan companies. They will lend you the money to cover the costs of carrying out your first big job, and they will expect payment once your customers have settled their bills.

As you can see, financing your new business venture doesn’t have to involve a traditional bank if you don’t want it to. There are other ways of getting the financing to set your business up and ideas that you can use to keep that business running over those vital first months. Just because you may have fallen at the first hurdle, it doesn’t mean that you have to give up on what could be a successful business one day.

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