New Business Funding

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01 Nov New Business Funding

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New Business Funding

new-business-fundingIn times of economic hardship, finding new business startup funding can be a challenge. There is very little money to loan, and so many people seem like they’re in debt. Not only is it difficult to actually find new business funding, the fear exists of getting involved in a loan that you won’t be able to repay or might eventually be underwater. And while this is all possible, it is nonetheless worth attempting as long as you’re smart and understand what you’re looking at.

There are many different ways of funding a business. Let’s examine a couple of them:

1. Friends and family – This is still one of the best ways to fund a new business. The reason why is that they tend to be less stringent about lending money and repayment schedules, you’ll get better rates (if they’re charged at all), and it’s a good way to practice pitching your idea in a lower-stress environment than trying to jump right into a meeting with venture capitalists or loan officers. Just remember that you are still borrowing money in good faith, so don’t do so half-heartedly. Pitch your idea the same way you would to anyone else, and make sure your legal paperwork is just as stringent. Not only will this give you good practice, but it’ll also help prevent hurt feelings down the road.

2. Credit cards – The director Kevin Smith, when he was looking for financing for his first film, took out ten credit cards and used those in order to purchase what he needed. He took a risk, hoping that his film would be a success, and it paid off. If you’re using credit cards to help finance your business however, keep in mind that they are for cash flow management, not long-term financing. Keep a couple on hand with no balance on them and use them when you need cash only, then pay them off at the end of the month. It’ll give you a little leeway and can be a great tool to help you get by when you need immediate currency.

3. Bank loans – Banks usually give loans in two forms: fixed amounts and lines of credit. A fixed amount is all your money at once and you start paying interest immediately. Lines of credit tend to be a better option as they give you a maximum you can spend and you only pay out what you need. More to the point, you don’t start paying interest until you actually start spending money. It’s easier to obtain bank loans if you have either assets you can leverage against the loan or guarantors to support you (such as cosigners or an SBA loan).

4. Leasing – Leasing is a sort of alternate business funding method. Rather than outright purchase big-ticket items, you can save money in the short term by leasing them. This includes space, equipment, vehicles, and anything with a significant price tag. While this may end up costing you later, it’s usually worth the gamble at the beginning of starting your company since you’ll be in a better position to purchase later on, and there’s potential to work out deals with suppliers for purchase if you’ve been a good leaser up until that point.

These are by no means the only types of new business funding. In fact, there are even several variations of all of these. The trick is to put together a solid business plan and presentation, speak to a financial advisor or consultant, and keep asking. Sooner or later, somebody will be willing to put up the money you need to get going.

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