It’s certainly not a surprise that many young professionals desire to start their own business one day. The allure of being an entrepreneur is strong, and many desire the perceived freedom that comes with being your own boss. Regardless of whatever type of business you’re trying to start, it’s likely going to require a significant investment on your part; both a time investment and a financial investment. When it comes to the financial investment side of the equation, that’ll either require spending your own money, or borrowing or receiving money from someplace else. Of course I’d advice prudence and being smart about borrowing money (lower interest rates, and don’t get in over your head), but I’m not naive to think that borrowing money won’t be part of the equation. 

If you are searching around for financing options you can get help here, in the meantime, here are some general pointers on how to go about obtaining the funding to get your business up and running.

Prepare for a certain amount of personal commitment

It is often the case with any form of a startup venture that any lender or business investor will be looking for a level of personal financial commitment from you as part of the funding arrangements. If you’re not putting your own money in, that sends a message that you don’t believe in the business enough. 

Self-funding is clearly the cheapest financing option as you are putting your own cash into the business but many people don’t have the financial resources to completely fund a new venture. However, you might find that a lender will match your own level of cash injection or they will at least require you to agree to a personal guarantee as a form of security for the loan being offered.

Creatively crowdfund it 

In today’s modern day and age, it’s not just banks, investors, or friends/family that can help fund your business. One option to consider is the relatively new idea of crowdfunding.

The basics of crowdfunding involve you posting a pitch for the money on the crowdfunding platform by describing what your business idea is, how much money you need and why together with a prediction of what sort of return on investment you expect to deliver.

There are quite a few crowdfunding sites (GoFundMe is a big one) to consider and if you have a convincing business idea it could prove successful in achieving the funding target you have set. You should carefully work out how much cash you actually need and how much equity you are prepared to offer if that is a requirement of the loan. Or it may not even be equity that you give up, I’ve seen some crowdfunding examples offering the product in return for a financial committment! 

Looking to banks 

Business funding options have evolved greatly in recent years and there are now plenty of avenues to explore in your quest to get the money you need for your venture. However, the traditional starting point in your round of fundraising is to try your bank to see what sort of loan and working capital they will agree to provide. Banks often will offer to lend money at a lower interest rate than other types of investors, and you won’t have to sell part of your company to receive it! 

You will need to produce a comprehensive cash flow forecast and business plan so that you can demonstrate how the business will be able to repay the monies that are being borrowed. It is certainly worth investigating what the banks are prepared to lend you and what sort of terms they will agree to.

Lending criteria has tightened greatly when it comes to business funding and banks and there is a chance that they may not be able to offer you what you want or give you the sort of terms that you find acceptable. It is almost guaranteed that a bank loan will require to provide some collateral against the borrowing and you will need to be prepared to accept this scenario if you are going to approach some banks for your business funding.

Check what sort of startup capital you might get from your government

Another potential source of business funding could come in the form of some government cash. Certain regions are considered in need of economic assistance and a boost to employment levels which is why it could be highly relevant to your business, especially if you plan on hiring. 

If you are close to an economic development zone, for example, it can be the case that some government grants and economic development loans are available for your startup. You might even be entitled to some free startup capital with some government schemes that are aimed at boosting business so it is advisable to investigate whether your business could be eligible for this source of funding.

Venture capital 

Finally, there is also the possibility that your business might be a suitable proposition for a venture capital deal. Venture capitalists tend to look at businesses that are experiencing rapid growth and are demonstrating potential rather than startups but if your factory business has got exciting prospects it might be considered a viable proposition.

The downside is that a venture capital deal will involve giving up a fair amount of equity in your business and you will have to plan for an exit strategy where cash is repaid at a future date.

Getting the funding you need for your new business will likely take a lot of work on your part and will be time consuming. It may even take a variety of funding options. Ideally try to bootstrap (use your own money and start small) and grow your business that way. Watch out for lenders charging too much, and don’t take the first money someone offers you! Shop around and be smart! 

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