Getting a business off of the ground can be difficult if you aren’t independently wealthy. Many entrepreneurs have to get creative when it comes to finding sources of cash to fund their new business. If you have a great idea for a new company, but aren’t able to finance it on your own, here are five ways that you can get your company started:
1.Family and Friends
If you’ve got a great business plan, share it with your family and friends. You may be surprised at how many of the people that you know are willing to kick in a few bucks to help you launch your business. In return for their backing, you can offer your friends and family free services for a year or a percentage off any goods that they buy for a specific amount of time. You may also want to consider sharing the profits of your company with any friends and family that contribute a significant amount.
2.Home Equity Loan
If you own your home, consider taking out a home equity loan to finance your business. Be careful to only take as much money as you need because a home equity loan will need to be repaid on a monthly basis. If you can afford extra payments on top of your mortgage payment, a home equity loan or a home equity line of credit are very real possibilities for funding your start-up.
Did you know that you can borrow against your 401(k) or IRA? If you have money invested into either of these savings accounts, borrowing against them can help you launch your new business. Money borrowed from your 401(k) will need to be paid back within five years, and monies borrowed from your IRA will typically need to be paid back within 60 days. If you’re certain that your company will start to turn a profit quickly, borrowing money from these savings accounts can be a quick way to get the cash that you need.
If you’ve got good credit, you may qualify for a business credit card with a high limit. If you can find a card with a limit of $5,000 or more, you’ll have instant access to the funds that you need. Before you max out your credit cards to fund your new company, keep in mind that you will have to make at least the minimum monthly payments. If you won’t be able to afford these payments, it doesn’t make sense to use credit cards to start your business.
Social lending is a great way to finance your new venture. Sites like Prosper.com and LendingClub.com offer loans to people who want to start their own business. To secure a loan, you register on the site, post your request and different lenders will bid on your loan. Once you receive an offer that you like, you contact the lender or accept the loan and receive your funds. Like traditional loans, you’ll need to make monthly payments, and skipping or missing payments will adversely affect your credit rating.
Don’t let your lack of funds dash your dreams of owning your own business. There are several ways of getting the cash that you need to begin your own company if you know where to look. If you understand how to secure financing, opening your own business is a very real possibility.
Seth Wing is a full-time writer for higher ed blogs and journals nationwide with a focus on online education opportunities. Several schools offer online degrees in business, including Norwich University and University of New Haven.