If you’re new to the business world, you’re going to find out rather quickly that setting up shop is no cheap venture. Starting your own business is extremely costly, which can make it difficult for entrepreneurs to fulfill their lifelong dream of owning their own store.
That’s why small business owners need to secure funding to help them get off the ground and share their products and services with the world. But how does one gather enough money to open their own store? That’s what we’re going to discuss.
Common Business Costs
Before diving into the ways you can secure funding for your business, it’s important you know what you’re getting yourself into. There are many costs that may not be top-of-mind when you begin planning on starting a business.
Here’s a list of common expenses you should be aware of when starting a business that you may have to pay:
- Phone bill
- Office equipment and supplies
- 401(k) match
- Health benefits (health insurance, dental insurance, vision insurance)
- Employee training costs
- Income tax
- Sales tax
- Payroll tax
- Property tax
- Excise tax
- Self-employment tax
- Dividend tax
- Gross receipts tax
- Insurance (renter’s insurance, property insurance, casualty insurance)
- Advertising and marketing
Options for Funding Your Business
Now that you know the potential costs you may have to pay as a business owner, it’s time to explore the different options available to you to secure funding. From loans to fundraising and everything in between, this list will serve as a great starting point to get your company up and running.
Option 1: Take Out a Loan
Taking out a loan is one of the most common ways for businesses to obtain money to help with their costs. However, it’s important to remember that when you take out a loan, you go into debt, which is why you should only take out as much as you need. With that said, consider these loan options:
- Bank Loan: Many banks will lend you money to help your business get off the ground. When searching for business loans from a bank, as with all loans, search for ones with low-interest rates and good terms that work for your situation.
- Asset Loan: An asset-based loan uses your assets (what you own) instead of your income as collateral. These are great for new businesses because items, such as inventory and equipment, can be used to secure the funds they need.
- SBA Loan: The S. Small Business Administration helps entrepreneurs by offering their own loans. For business owners who can’t secure a bank loan, the SBA will give you funds as long as you meet their eligibility requirements.
Option 2: Crowdfunding
Another way to raise money is through crowdfunding. Crowdfunding is typically used for a single project, such as opening a business, buying an expensive piece of equipment, etc. On a crowdfunding site, you will write a description explaining why you’re asking for money and what it will be used for and set a goal and a time limit. In return, most businesses will offer an incentive, such as a $25 gift card to their restaurant if a person makes a pledge.
Option 3: Search for Angel Investors
An angel investor is usually a wealthy individual or business formation company that will ask for part ownership or convertible debt and will provide funds in return. When pitching to an angel investor, you want to make sure you’re clear, concise, and have a thorough business plan. These investors are smart and don’t want to lose money on a risky investment. Make sure you highlight how your company is different from others in your industry, what problems your products or services will solve, and how you plan to grow your company.
Option 4: Ask Friends and Family
Your friends and family are your number one supporters, which means they’ll do anything to help you succeed. When starting a business, ask those closest to you for a donation to help you achieve your dreams. However, the last thing you want is to sever ties with your loved ones because you took their money without a solid plan and ran off with it. Show them you mean business by approaching them with your business plan, financial projects, and market research.
Securing funding for your business may sound daunting, but isn’t as scary as it may seem. There are many people who are rooting for your success, and if you show them you have what it takes to run a successful and profitable business, they’ll more than likely help. From bank to investors and friends to random people on the internet, these tips will help you get the funds you need.