Having a big idea for starting or expanding your business is great, but now what? You will need to buy or rent office space, hire employees, purchase stock, develop web application and have some cash in hand for paying monthly rent and wages.
However, according to a survey, nearly 90% of new businesses fail to sustain even for a year. And, one of the most common reasons they fail are because of lack of sufficient funds. Money is the fundamental requirement for any business. The journey from conceiving the idea to generating the revenue requires a fuel known as capital. Therefore, startups as well as enterprises are always looking to arrange funds with the purpose of expanding and growing their business.
In this post, Bridging Finance 4 U have compiled a list of 5 financing techniques that will help you raise capital you need to boost your business growth.
#1 Personal Savings
The most common way people fund their businesses is by using money from their personal funds. Many enterprises call this ‘bootstrapping’, which means financing your business by gathering funds you have. If you have personal savings, credit, or assets in your own name, you can use it to finance your business. Some entrepreneurs prefer to use funds from their savings account, while others prefer to use credit cards. This can be beneficial as you will not have monthly payments or extensive loans to repay. Moreover, when you invest your own money, you are always tied to it. Later on, the investors may consider this as a good point, and may eager to collaborate with you down the line.
#2 Ask Friends and Family Members
If you don’t have own savings or funds, but your expanding business demands additional funding, then do not be disappointed. One of the reliable ways of collecting funds is by requesting your friends and family members. Narrow down the list of people who have faith in you and who understand your vision. A supportive family with spare money can provide you with a fair source of finance. In most cases, your friends are investing in you, not your business. So, make sure you don’t end up breaking the trust. Both parties should consider this investment with no strings attached. Make sure you also discuss when you are going to repay. Finally, when your expansion plan succeeds, giving a reward to these lenders would be a good gesture.
#3 Apply for a Loan
Another common source of raising funds for your business is to apply for a loan. Getting a loan from a bank or a finance institution remains the primary way for business to borrow money. Based on a research by the Small Business Administration (SBA), nearly 75% of business finance come from loans and lines of credit. Both banks and private lenders offer loans under your business name with certain terms and conditions involved with the repayment. Business loans can be obtained in two ways: secured and unsecured. Secured loans can be obtained against property, investments and assets as collateral, while unsecured loans can be obtained based on the borrower’s proven history of revenue. Secured loans may be easy to obtain and have a lower rate of interest compared to unsecured loans.
#4 Bridging Finance
Although ideal for buying properties, bridging loans are also used by business owners. For instance, you want to buy new office, new industrial unit or business assets for expansion of your business. This requires a huge amount of money, which cannot be borne from your pocket. Standard bank loans take some time to get approved, so in such situations bridging finance in the UK is your only hope to get quick access to funds. With bridging finance, you can put down your current office as collateral to secure the loan. Even if you need funds to buy stocks or shares, you can present your business plan to the lender in order to get your application considered for the bridging loan. Bridging loans are increasingly becoming popular amongst businesses because of its vast range of benefits.
Crowdfunding is a relatively new way of raising funds, which has turned out to be really effective for many. Websites like Kickstarter.com allows small businesses to gather funds for their operations. You can present your business ideas, goals, target profit, the reason you need funds and other details on the websites. People then read about your business and come together to pool money if they like your idea. However, you need to keep in mind that investors or donors on these sites are private individuals that provide small sums with fewer restrictions. You don’t need to pay back, but agree to develop and deliver product for which the investors have donated. Crowdfunding is ideal when you are not able to get a bank loan, or gather funds from family and friends.
There are plenty of other ways to raise the finance you need for your business. Lack of capital shouldn’t prevent you from achieving your dreams of accelerating your company’s growth. If you keep these points in the mind to avoid stress of finance with a business plan that demonstrates the worth and faith of investing in your company, you will significantly improve the chances of getting the capital you need, regardless of the type and size of your business. Don’t be discouraged if one of these don’t work. By being persistent and diligent, your business will no longer be held back by money. You can grow and expand as much as you want.
Do you have any other financial resources in mind? Did these suggestions help you in securing adequate funds? Feel free to share your experience regarding using these techniques.