How to Get Startup Money for a Small Business
Running a small business comes with challenges at the best of times, and when you’re just starting out, these difficulties can often be even more pronounced. As such, knowing how to get startup money for your small business can be valuable – and today, we are on hand to help you make that decision. So, without further ado, let’s take a look at how you can get startup money for your small business!
We look at some different options on how to get startup money for your new business
There are numerous funding opportunities for small startup businesses. If you have been looking to find your own firm, these could offer a valuable opportunity to consider. So, without further ado, let’s take a look at the following tips to get startup money for your small business venture.
1. Use personal finances for your startup money
One of the most prominent sources for funding for your small business is to dig into your own wallet and invest your own money. This will give you complete control over the business.
However, it’s worth noting that most people will be limited in how much finance they can invest in their new startup small business. As an additional point, there’s no guarantee that you will see the money back – so, you should only ever invest money with the assumption that you won’t see a return.
2. Ask friends and family for your startup money
If you don’t have enough finances in your savings to start your small business, or if you would prefer to spread the risk, then you could ask friends and family members for a loan or investment.
This is a quick and effective way to get capital to start your new small business, and you can often save money on loans from friends and family members compared to banks. However, if things go badly with the small business, your relationships could be placed under a great deal of pressure – so you should be prepared to assess whether or not the business model is likely to be a reliable one first.
3. Arrange a bank loan for your start up money
An alternative to borrowing money from your friends and family members is to take out a bank loan instead, often providing more considerable sums of money, allowing you to do more with your business than if you had a smaller opening capital.
However, bank loans can come with rigorous terms and conditions, and the repayment and interest fees can be steep. As such, always make sure you’ve shopped around before taking out a bank loan for your startup small business!
4. Explore Business Angels and Venture Capitalists for your startup money
Business angels and venture capitalists are very similar, offering investment into your startup small business in exchange for a share of the business. Typically, business angels will offer a smaller sum of money for your business venture, commonly working as part of a group to increase overall investment. Meanwhile, venture capitalists are often more significant investments, offering substantial sums of money for a greater level of business equity.
Typically speaking, venture capitalists will only be satisfied with a larger share of your business, although they will support you during the running of the business. In contrast, business angels will usually be happy with a lesser share, which is great if you don’t want to give away much of your startup business – but be aware that they often won’t be as directly involved in the business management.
5. Look at Government grants for your startup money
As a final option, have you considered whether your business could be eligible for grants and funding? This is something that many startup business owners don’t consider – but in reality, there are many different grants available for businesses to consider as part of their startup endeavours. Grants are the closest any of us can get to free money, as you don’t need to pay these back, and this can hence help your business start off on the right foot.
However, you should always be aware that most grants come with stringent regulations to follow. So, before taking on any grant, always ensure that you will adhere to the grant’s requirements first and foremost.
Beware of Short Term Loans
Another option that you may have considered for your small business startup is short term loans. Short term business loans are a simple way for your new business to get rapid investment. However, the repayment terms are often crippling for small businesses. So, don’t make the mistake of leaving your business in debt to a short term “loanshark” lender before it’s even made its first sale.
You can look at 10 steps to help you kick start your own business here.
Running a small business comes with its challenges, but it can also be a gratifying activity. To this end, a growing number of people are choosing to invest in their startup businesses – and if you follow our tips, you may be able to enjoy tremendous success with funding for your new small business as well.
Of course, the main thing to remember here is not to run before you can walk; take things slowly and don’t rush into any venture. This will give you the best chance of building a profitable small business model without ending up in overwhelming debt early on.
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