10 Ways to Fund Your Business

November 10, 2013 asparker

business development, Career Changers, Lawyers, Meaningful work, practice management, tips

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If the work you are doing is not fulfilling or meaningful, then it is time to search for a new job that makes you feel fulfilled so that you are doing work you love. One way to find meaningful work is to start or buy a business yourself. It takes money to start a business. If you are excited about your business you will find a way to fund it. Here is a list of 10 sources for funding.

1. Self-funding – You provide the capital necessary to start your business with your own savings and/or assets.

2. Friends or relatives often have money to invest. You will have to convince them that your business idea is a good one. If you have a well thought out plan and a lot of confidence and enthusiasm you will be able to convince them to loan you the money. The loan can be structured so that there is a benefit for everyone involved.

3. Line of credit – If you have an asset that is valuable a bank will establish a line of credit for you. People use their homes as the asset or if you are already in business your business could be that asset. With a line of credit you might have access to $100,000 but you pay interest only on the amount you actually use.

4. Personal loan – A bank gives this type of loan based on your borrowing history and the credit you have established with them or based on an asset you own. With a line of credit you only use what you need and pay interest on that. With a personal loan you get the full amount and pay back both the interest and principal over time. Whenever the loan is secured by your home, proceed cautiously. It is possible to lose both your home and your business if you fail to make your payments.

5. Crowdfunding – Using a website specifically designed for this purpose, you can set up your own page explaining your business and asking people to fund your business. Sites like Kickstarter.com are available for a fee to host your page and attract investors. To encourage investments the fund seeker offers a premium, sample or gift. There are many businesses that have used this type of funding. Recently the SEC announced rules and regulations around issuing stock and selling a stake in the business. This is a more complex method of crowdfunding and is very new. Proceed cautiously. Read more in this Forbes article. One site that can be used for this type of funding is Crowdfunder.com

6. Credit Card – This is probably the most common way people borrow money to make purchases You won’t need a plan or an asset to borrow against but you do have a credit limit. Interest rates can go up so use your credit card cautiously.

7. SBA loan (US only)/Commercial loan – The SBA doesn’t actually loan money but they will guarantee your commercial loan for the bank. To apply for this type of loan the bank will want to see a business plan along with some financial information about you.

8. Micro loans – These are loans from nonprofits or government agencies that focus on economically deprived communities and minority groups. These are usually loans for small amounts of capital for example under $25K. Small Business Development Corporations in various communities offer these kinds of loans.

9. Angel investors – These are investors who provide money to start up business. They take a greater risk than a bank and will want to make more money because of that.

10. Venture Capitalist – These are groups that have funds available who are willing to take a big risk (often on new technology) and expect a high return. This is usually a source for an existing business rather than a new one. VCs invest large amounts of money in the business and therefore own a large part of the business. Their goal is to sell the business in a relatively short time. One way they sell the business is by taking the company public through an IPO (Initial Public Offering).

Free Consultation

In my coaching practice and also as a SCORE Accredited Business Counselor I have worked with hundreds of clients who need funding for a business. Funding can be for a new business or an existing one. If you are thinking of starting a business or if your current business is not giving you the satisfaction you expected, whether you need funding or not it might be time to work with a coach. Let’s talk to see if I would be the right coach for you. Call me at 781-598-0388 or email me at asparker@asparker.com. The consultation is free.