How are you funding your startup?

By Henry Brown

When you decide to start a business it’s an exciting whirlwind and when you stop to catch your breath the task ahead can seem to be quite daunting. No matter which industry you’re entering or which direction you’re going in, there are so many things that you need to consider before you can go forward, like your business plan, your company name, are you working alone or with employees or partner? Do you need a premises, or are you working out of a home office? And, on top of that, you need to plan in time to register your business, do any hiring, networking, and set up things like business cards, websites and social media. You can look for support for your start-up by using a company like Your Company Formations. But the biggest thing you need to consider before you can do anything is to figure out how you’re going to fund your business before it starts funding itself.

Two jobs

You always have the option to begin your business alongside your existing job. Moonlighting would only be a temporary fix as you don’t want to be working two jobs for very long. But it is a good idea to set up your company while having a constant income if you don’t have any savings to fall back on. Just try not to have the mindset of if it doesn’t work you have plan B sorted already – it’s a negative train of thought and will prevent you from giving your new business your all.

Loan

If you need some extra funds quickly, you could look into getting a loan to kick off your enterprise. There are many different loans you can get, and you would normally be inclined to apply for a business loan as, logically, it’s going towards your business. However, because so many new businesses fail before the loan can be paid off, the interest rate on business loans tend to be quite high. Plus, such loans are hard to obtain in the first place. So then you’re left with a personal loan, which should have a lower interest rate due to the fact it’s in your name and not in the name of your company.

Crowdfunding

Crowdfunding is a way of raising money by asking a large number of people to each give a small amount of money. This can happen a number of ways – the most desirable, as you don’t have to give any money back, is for people to believe in what you’re doing and give you the money purely because they want to. This usually happens for companies that give back to the community like theatre schools and youth groups. Also, if you are going to be offering a product, people who believe in the product and who want to be among the first to have access to it may participate in your crowdfunding effort.

The next option is to get funding from an investor – this way you pay them back with interest as your company grows. The third is to give shares in exchange for money, for this, people need to believe that your company is going to take off, and be worth the risk they are taking.

Choosing the appropriate funding approach will require careful thought and research. This is something that requires your attention long before you open the doors of your business so don’t delay in making a solid financing plan.

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Henry Brown is an online marketing executive. When he isn’t talking shop he’s roaming the streets of London, uncovering the extra-ordinary in the ordinary.

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