Business is one of the most basic, yet most common means through which people get employed nowadays. Whether it be making, owning, and managing a business, or working for one, it would be difficult to imagine a country, or any place with human life without having a business of some sort, and is thus the primary means through which people earn for a living. If you are on the owning and managing side, a common inquiry would be: “How can I possibly start?” Once that question has been set in mind, another thing you have to ask is: “How do I get capital for my new business?”
While your mind might be teeming with great ideas, as well as a wide variety of prospect sources for money, here are 5 effective, and of course, realistic ways on how to effectively finance your budding business.
Use Your Very Own Assets
The most common, and ideal source of capital would be that of your own. The reason for this is that it directly comes from your own pocket. This is where roughly 70% of people get the capital they need to start their business. With that said, people often go and auction things that they don’t really need, such as jewelry. Some people also sell their cars with hopes of having a huge capital. Others, for love of business take things up a notch and sell their homes to settle in a smaller one.
When it comes to personal property, a less drastic measure includes getting an equity line of credit, or a home equity loan, which may cause an increase in your monthly mortgage. Make sure to get these paid, lest your house would be taken from you.
Ask help from friends and family
If your own assets aren’t enough to achieve your target capital, one of the things you could opt to do is to ask help from your family and your close friends. The best way for you to do so is through loaning from them, and not an equity investment. Doing the latter would effectively make them co-owners of a business. While it isn’t really a bad idea, it would still be best to start as a sole proprietorship once you’re still in the baby steps of your business. In the long run, it could cause trouble, as having other people as proprietors in your business may give more people a “say” on the pertinent transactions of the business, which could veer it off the path you intend.
Make Use of Credit Cards
If you want to take a shortcut, then one of the most common go-tos among aspiring entrepreneurs would be their credit cards. The reason for this is that it basically by-passes the extremely tedious process of filing for a loan application. All that you would have to do is to get a credit card, set it for an upper limit that’s greater than your intended capital, and you’re good to go! Swipe when you need to buy things and your business is up and ready in no time! Conservative estimates for credit limits range from $10,000 to $50,000 if you want a capital for a small business. So long as you are able to meet the minimum monthly payments, you are able to carry a large balance with you. One of the advantages you may have to consider, however, is the fact that interest rates may be extremely high, which could cause you to spend more than you could have.
Availing of Micro Loans
If you’re based in the United States, then this is something you could avail of. This works by making use of intermediaries, which allows small-scale business owners to borrow money by receiving money from the SBA, or the United States Small Business Administration. Their loans are that of low-interest rate, and the range for loans you can avail of include those costing $100 to as high as $35,000, with interests ranging from 8 to 13 percent, which is considerably lower than other loaning programs.