In this post you’ll learn a few answers for the question: how to raise money for a small business?
When it comes to starting a business, one of the biggest constraints is money. We all know of the person and you might be one of them who believes that if by chance he won the lottery, that the money would be used to start a business. The problem is that such events are very rare. As mentioned on the post: what are your odds of winning the lottery? you have a almost 1 in 14 million shot in winning. So, lottery is definitely off the table for now. There are more down to earth ways of raising money for a business and below are a few of them.
How to raise money for a small business?
The keywords in small business is “small”, which implies that although it might cost you some money to start(money that you probably don’t have), it is not as much as it would be to start something like: let’s say, an airline. Since you probably don’t need a million dollar budget to start your small business, the strategies below can do the trick.
1.Save
This is probably the oldest strategy on the book. Whenever we want to buy anything we don’t have the money ready for we save. This is becoming less and less common as people tend to rely on more and more in credit cards, but it can certainly do the trick depending on your income and expenses. As the comedian Bill burr mentions on the Monday morning Podcast: on the pursuit of your dream you have to cut down your expenses and live with only what you really need. If you’re income is high enough and the money you need is not too big, saving alone for a few months to years can do the trick.
2. Credit card
The second solution for this money problem is the old credit card. If you have good credit and the money you need is not that big, your personal credit card can give you the option of starting your small business early. The problem is that most startups end within the first year of operation. Failure is a very likely scenario in business, and if you have a load of debt along with it, the loss is greater. It will not only be emotional but also financial. So, one good thing to do if you plan to use your credit card is to use it the as little as possible, which means getting the money from other sources.
You can also go to your bank and talk to an adviser. Bank institutions usually have some form of credit/funding to people who are planning to start a business. This is assuming that either your credit card alone and/or saving will take you a long time to be able to get the money you need(5 to 10 years+).
3.Competitions
This is by far one of the least thought of sources of money. If you prototype your idea cheaply, competitions on the same niche can be a good source of startup capital. It is all a matter of looking for competitions on the context your business idea, and subscribing for as many as you can. The advantage of doing this is that if you win you can use the prize money as capital for the business. You can also get connections with people who show interest to your idea(new investors and/or possible business partners),and all of that without having to incur any debt. The problem(probably the biggest one) is that if your idea can be easily replicated, there is always the chance that it might be stolen. So, do your best to get a patent as early as possible.
4. Friends and family
This is a valid option but probably the last I would go for. Although some of us might be friends with or related to people who can lend us thousands and thousands of dollars in a snap of a finger, the price to pay if the business goes sour can be too big. Some people might understand if you lose the $5 000 they borrowed you trying to start a business, but more often than not, the relationship always takes a hit when such things happen. If all goes well on the other hand, it can uplift it.
Summary
Try out each one of the tips above alone, and to minimize the cons of each make a mix and see what works for you 🙂
It is all about knowledge and experience;)
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