During the early days of the life of a small business, it is in desperate need of money to keep things ticking along. Indeed, there are likely to be other times that the business needs a cash injection – whether this is because you want to keep things growing or you need to get yourself out of a rough patch. There are numerous ways of funding your business which we are going to discuss right here in this article. They generally fall into two main categories: equity and debt. It is the former that we will be focusing on in this article. Hopefully, this will help you to assess all the different options in front of you.
Many entrepreneurs take it upon themselves to fund their business, whether through savings or personal debt. If you are planning to go down this path, you may need to investigate further how to apply for a personal loan. An alternative method of generating cash is selling assets. While there are advantages of taking everything on your own shoulders, you need to ensure that you have done your sums carefully so you reduce your risks of getting into serious trouble.
Friends and Family
When people can’t do everything themselves, their next step is often to turn to their friends and family. However, if you are planning on getting help from those around you, you need to be sure that they are fully aware of the risks involved. Otherwise, this can lead to hurt feelings and even ruined relationships.
Typically, angel investors are wealthy individuals who are willing to invest in different businesses. Often, a number of these people get together to form a group, which helps to minimise risks. You can find many of these groups listed online or through your local chamber of commerce. You may well have to fulfil certain criteria so that these groups are willing to fund you. Always check carefully what their terms and conditions are.
Taking on Partners
Taking on a partner, who may or may not be an employee of the business, is another possible source of funding. You could have a partner who is actively involved in the decision-making of running a business or else a ‘sleeping partner’ who puts in the money, but leaves it up to you to run things.
Crowdfunding is a method of business funding which has become particularly popular in recent years. This is something which is generally done online and gives you the opportunity to connect with thousands of potential investors all at once. As there are so many different crowdfunding platforms out there, you need to make sure that you have done plenty of research before you settle on the one that you think is right for you.
So, this covers the main ways of equity funding your small business. The financial situation of your business is the area that you need to keep a close eye on, so take the time to make an informed decision.