Six effective ways to finance your business
After successfully developing your
business idea, the first thing to do is to make sure that you have enough funds to finance your
business. Finding adequate
financing for startup capital or supplementary capital is quite challenging for most
business owner-managers.
This read will provide six finance strategies to help secure financing for their business.
Six Financing Strategies
- Purchase Order Financing – raising capital for your business is difficult but many investors are more than willing to provide financing for purchase orders from credible customers if the return on investment is adequate.
- Secure a loan from a bank – it is easy to assume that banks are in the business of lending money to earn interest but qualifying for a business loan can be difficult and most owner-managers are required to provide collateral and personal guarantees to qualify.
- Credit card – probably one of the most popular business financing options being used, it is also potentially the riskiest, with high-interest rates and high monthly payments in comparison to securing a loan. This is because most people fail to use their cards appropriately leaving them with a lifetime of debts or a bad credit score. Therefore, if you opt for this option makes sure that you are disciplined enough to appropriately use the card.
- Tap into your retirement money – This is a cheap way of financing your business by lending money to yourself. Depending on how you extract the money ie a loan or a withdrawal has different tax implications and long-term effect on the value of retirement savings. We should note that this is not always a good option and you should count the cost of utilizing this option.
- Crowd funding – This means of financing is a means of supporting people with one-off ideas by offering to pre-order their products or service. Technology has birthed so many ways of accruing resources and this is one of them. You will have to find a crowd-funding site, the most popular being Kickstarter. It is a low-cost model of generating funds similar to holding a fundraising event, however, it is not a long-term method for getting funds. It entails setting a time and fund limit by the business owner. For example, the business owner might decide to set a time limit of thirty days to raise funds amounting to three thousand dollars. After these limits are set, the business owner then seeks the aid of family, strangers, and friends to achieve this limit.
- Savings and Future pay – If you are willing to offer up your savings and a portion of your salary, this would probably be the best way to start your business until you gain enough traction and the business is able to sustain itself.
To learn more about
Costbucket and how we support businesses with their decision-making process, please
contact us.