If you are looking at starting up your own business it is certainly a good idea to find a good and safe way to finance it. Unless you have a few hundred thousand dollars sitting around – and hey, who has so much money? – chances are that you are not going to be able to pay for your company all on your own. At least not for these 2,5 years which it takes in average to become profitable.
Instead you need to look towards outside sources in order to finance your business. There are a few different options available for you when it comes to obtaining this kind of credit. Some of it does depend on your credit score while others are just going to give you the financing on good faith. Of course you should rather go for money without or a low interest rate attached to it.
Financing through family and friends
Often it is a very good option to ask your relatives and friends. I know that many people feel uncomfortable to ask family members for money. Especially for quite a big sum of money which you need to start your business.
But keep in mind that your success depends a lot on loyal friends and family members who support your way to becoming an entrepreneur. In fact several studies have concluded the same. So why not involve these people financially, too. These guys are going to be the best bet of obtaining a loan for your business without charging an excessive interest rate. While you might not receive as much money as you need in order to open the business, it is going to reduce the amount of financial support you have to take out when it comes to the other lenders. A sort of ‘friend’ could also be a business angel. These guys are usually business owners by themselves and beside financial support they will also be able to give you a lot of advice in daily and strategic business.
Just keep in mind that they probably act like friends but certainly they will keep an eye on getting an interest from you which is probably higher than from real friends and family members.
Financing through Banks
Banks are another option when it comes to a business loan. They are going to give you credit services to help you secure the necessary financial support. Banks usually offer different loan models designed specifically for a certain business or niche.
If possible try to choose a bank which specializes in supporting start-ups and business owners.
Also compare different offers as interest rates could differ significantly. High interest rates have taken down many companies in the past. And if you have a bad credit score then maybe you should also think of other ways to get the money.
But if you find a great offer with acceptable conditions and a low interest rate due to your good credit score and business plan then a bank loan is the best and safest way to get the money you need.
Financing through Money Lenders
Money lenders are similar to banks but usually they have much higher interest rates attached to the money you take out. This is because their restrictions to borrow money are lower than in banks and thus their risk is higher.
Personally I do not recommend to get your cash from a Money Lender – but on the other hand I have to admit that I know quite some successful business owners who started with really high interest rates.
In the end it is your decision if you are willing to go for rather bad conditions and start your business right away. Or maybe wait some time until your financial situation got better.
These are just some of many different options to get money for your own company.
It is your decision when and how you borrow but keep in mind that its not only about business and market opportunities.
Ask yourself if you still can sleep well and work hard and concentrated while being in high debts. Keep in mind that the success of your start-up highly depends on your energy and motivation. Being caught in worries on how to pay off your loan is an almost sure way to failure. So decide wisely and then move on.
That being said I m wishing you all the best, lots of courage, enthusiasm and luck!
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