Source: Business name, check; business product or service to be offered, check; business location selected, check; potential employees, check. Now all you need is the funding to upstart your idea. What kinds of financial resources are available for your small business venture start-up? Do you apply for grants or loans, or do you ask family and friends? Samuel K. Burlum shares various options for today’s small business owner in funding their small business start-up.
One of the largest hurdles an entrepreneur will face in getting their business off the ground is funding. Many small business owners find it difficult to obtain the capital they need to finance their new business venture. The good news is there are many options for capitalizing your small business venture. All you must do is research the opportunities and discover which finance options are best in line with the vision and growth strategy of your business.
There is an old philosophy about investing in one’s self. Before you can ask others to invest in you, you must be willing to first invest in yourself. This is true for both money and time. There are a few reasons to this. There is an energy that is so powerful about one’s own belief in themselves and about the venture they believe in that when someone truly sacrifices everything (as in money and time) it sends a message to other potential lenders and or investors that you have such high confidence and belief in your cause that you are willing to do what it takes to see your business be a success.
If you can self-fund your business it will eliminate the burden, stress and extra work that occurs in making a monthly payment to a funding institution or having extra measures needed to report to investors. There are several ways someone can self-fund their own business venture.
An individual can tap into their own personal savings account. The general rule of thumb is to reserve enough money from your personal savings to fund your own personal household expenses for six months to a year. Most business owners are unable to take a draw against the business’s profitability due to the lack of consistent cash flow in the early stages of start-up. If an individual has a stash of savings in a 401k or other type of retirement account, they may convert these investments into cash that can be applied to funding the new business venture. Be warned of any potential fees, penalties and taxes as a result from cashing in 401k accounts and retirement funds that have not yet matured.
There is new found money when making a few lifestyle sacrifices. One must decide to live as frugal as they can while their new small business upstart begins to take hold. This means that you may want to consider cutting out some of the “extras” in one’s personal lifestyle. Subscription television (cable or satellite) can cost up to $150 per month. Most business owners are home very little during the early growth of their business. Plan to eat meals at home more often or bring your lunch from home. The average lunch out can cost between ten to fifteen dollars per day; preparing meals that can be reheated over several nights will save money and time.
Watching how you spend your disposable income will be more important than ever. All those impulse purchases of merchandise at the register of one’s favorite retailer can eat away at cash better suited for building your own business. Make a list of items you need and stick to the list. Even dropping the temperature by a few degrees in the home can save a business owner a few dollars that can be allocated toward a business need. Every penny counts, and pennies add up to dollars; dollars that can help fund your business’s utility or phone bill.
New business owners who are eager to get their enterprise off the ground will even consider turning personal assets to cash. There might be a few items around the house or in storage that you no longer treasure. This could range from paintings or collectable artwork, or maybe it’s a collection of near rare hard to find antiques. These things can be sold and turned over for cash to help fund your new passion – your new business venture. Maybe you have stocks, savings bonds, or other investments you would not mind parting with. Some households have a second or third car. You can sell the extra vehicle and apply the cash from the sale toward the business. If you are leasing or own a new car that is financed, you may want to consider trading in the vehicle for a good used car, where you would have a lower monthly payment or even eliminating the payment and interest due.
A part-time job is another option in accumulating capital for your new business. An extra twenty hours of work a week could mean having another income that can be dedicated toward savings for up-starting the business. Some people may have had a wealthy relative which was kind enough to include them in their will as part of their estate planning. An inheritance can be used as either start-up capital or for growth; just remember, such a gift is a one-time life event. The last option in self-funding a business is that a person can borrow or even cash in their life insurance policy. Some policies will penalize the owner of the policy if it is cashed in before the policy has matured.
Boot strapping includes a series economic practices initiating from existing resources. Examples can include self-funding a business, managing a business to have early cash flow and a business’s thriftiness. Bootstrapping a business is necessary for most new small business owners until they have had an opportunity prove the business model can turn out a profit. You may want to adjust your business service or product offering so that the sales cycle is shorter and the turnover of cash is quicker. Once the business has been able to show a consistency in its revenue, then it may be in a position to pitch for outside funding.
Not every business is a candidate for bootstrapping. Most service businesses which can operate from a home office can bootstrap their operations. Business categories of a business consulting firm, marketing/public relations business, an appliance repair business, a landscaping business, legal counsel, or accountant, are all businesses that offer services with little or no inventory. Businesses that offer products are not in a strong position to bootstrap because they need funding for inventory. For the old saying goes, “an empty shelf never sells anything.” Once your business is showing a profit consistently, then it can be taken seriously by potential lenders and/or investors.
Before making any financial decisions, you may want to consult with a financial planner and your own financial advisor about the possible options and risk when liquidating your own personal assets or leveraging your assets to acquire a loan. The money is there; you just have to find it.
Q- Interested in starting your own business? Check out into starting your own TAPinto Franchise. To find out more, go to: https://form.jotform.com/81615840696970