In this guide, we will provide suggestions for proven ways to fund your business.
Crowdfund Your Business Idea
Crowdfunding is the process of getting small amounts of money from a large number of people. You set a monetary goal that you hope to achieve before a certain date on a crowdfunding site, and then share the link so your family, friends, and strangers can give you money to help fund your business. A lot of businesses were able to launch using this method, some of which were purchased by conglomerate corporations like Facebook for staggering amounts.
Use Credit Cards
Credit cards could be a risky way to fund your business because if you miss a payment or pay just the minimum, you could risk falling into a hole of debt that you can’t easily dig your way out of. But if you are able to keep yourself in check and pay your dues on time, credit cards would be a great funding option for your business.
Take out a Business Loan
Business loans are funds granted specifically to businesses. They can be obtained from banks, by mezzanine financing, or through factoring. Bank loans could be secure or unsecured. Secured loans usually need collateral like your house or any valuable property you own; if you fail to repay the loan on time, the bank will seize the property you put up as collateral. Mezzanine financing, a popular funding method in Singapore commonly used for business expansion, is the process of obtaining a business loan from a lender. Unlike business loans, if you fail to pay back the mezzanine loan fully on time, they have part ownership of the business. Lastly, factoring is the process of selling your receivables at a discount. This will help if you need immediate cash. After buying the receivables, the factor then goes and requests the money from the invoiced party.
Pledge Future Earnings
Many young and entrepreneurs resort to asking for an upfront loan in return for a percentage of their future earnings. For instance, you ask for 300,000$ and pledge 3% of future earnings to the lender. The how and when you pay back the loan is something you agree on with the lender, as this approach is still relatively new, so there are no fixed rules and regulations for it yet.
Borrow from Finance Companies
There are companies that specialize in lending money to small businesses, and their terms are usually more lenient than banks; in fact, some of them don’t even have any specific requirements.
The major difference between financial companies and banks is that it could take much longer for you to obtain the funds you need from a bank, while a finance company typically has a simpler and faster approval process. They also do not care about your credit score. It’s a good backup plan to keep in mind in case your request for a bank loan was denied.
Get an Investor on Board
Pitching your business idea and portfolio to an investor who would be able to fund your business is something a lot of business owners resort to. However, there are few things that you need to have in order to win over the investor and convince them that their funds won’t be wasted. Some investors care about the experience you or your team have. Having experience assures them that you’d be able to manage these funds wisely and use them properly for your business.
You’d also be required to provide them with complete market analysis in addition to a strong sales plan. This will show them that you know what you’re doing and that you are aware and prepared for anything that might happen in the market. Moreover, some entrepreneurs start their business only for the sake of following the latest trends, not out of a deep passion. Investors care about how passionate you are about this business idea. The more passionate you are, the more likely you are to succeed.
If you need to launch or expand your business, there are different ways that you can get the funds you need. Some require good credit history, but having a bad credit score is not the end of the world. There are many lenders who don’t necessarily care about your credit score as long as you can guarantee that their money will be paid on time.