28 Jun

10 Best Ways of Getting Money to Start Your Own Business

There are many people who would love to start their own business. However, it’s a much smaller percentage of people who actually do start their own business. One of the things that is holding some of those other people back is that they don’t know how to find the money required to assist them in starting a business. What do small business owners know that those people don’t know? They know that it doesn’t take a lot of money to start most small businesses. They also know where to find the money that is required.

Here are ten great methods of finding the money to start your own business:

1. Government Grants and Loans. One of the best ways to get money to start your own business is to get a loan. Many banks are not giving out loans right now to emerging businesses because the financial risk for them is too high. However, it may still be possible to get the loan that you need through your local government. In the United States, the Small Business Association has a great loan system set up that will assist you in getting the money that you might need to start a new business. It is harder to get this support in the UK but there are government grants available to certain types of businesses through the EU’s state aid program. It’s worth taking a look at this option.

2. Social Lending Programs. If you can’t find a loan through the government then you might want to think seriously about getting a loan through a social lending program (also known as a peer-to-peer lending program). These are programs through which private individuals make low-interest loans available to others without the involvement of an official bank. This has become increasingly popular with small business owners in recent years. Two popular sites to work on this through are Lending Club in the United States and Zopa in the UK.

3. Get an Angel Investor. This is a private individual (or a very small group of individual) who believes in your business plan and will back up that belief with money. This investor gives you startup money for the business. You may either return the investment with interest or offer a percentage of profits to the angel investor when the business takes off. Networking in your industry is the best way to find an Angel Investor.

4. Ask Mom and Dad. Loved ones are a great source of private loans. Many people have started businesses using the money that a family member was able to lend to them. If you have family members that can do this for you then it can be great. Make sure that you talk about the details ahead of time so that everyone knows about the risks involved in the personal loan.

5. Hold a Fundraiser Event. You may not have a single family member or friend who can give you a loan. However, you probably do have a large group of friends and family who can each contribute a little bit of startup money to your cause. A great way to get all of them to help you out is to hold a fundraiser event for your new business. A party where you accept donations, a silent auction where you sell your own artwork or even a big yard sale announcing that profits go to the business will all encourage people you know to spend their money with you. The best thing about a fundraiser is that it’s not a loan so you won’t owe money to anyone for their help in getting the business started!

6. Credit Cards or a Line of Credit. It is possible to take money off of your credit card to finance the start of a new business. This is highly risky and isn’t necessarily recommended as a first course of action. However, if you have a strong belief that your business can succeed then you may want to take the risk. Have a strong business plan, limit your startup spending to the absolute necessities and make sure that you have a back-up plan for paying off the credit card if your business fails.

7. Sell Everything you Can. Another choice for people who want to take a chance on themselves is to sell everything that they don’t absolutely need and to use that money to start their business. This may mean moving to a smaller home, selling your car and getting rid of all of your furniture. People who do this believe that they’ll earn enough from their new business to get the things back someday. Most of them turn out to be right.

8. Use Your Existing Job to Fund the New Job. It isn’t actually necessary to go whole hog when you start a new business. You can continue working full-time at your current job while launching your new business. As your new business grows and starts to earn money, you can reduce your hours at the old job and increase your hours at the new business. This allows you to use your existing income to fund the new job. If you engage in smart money-saving habits and frugal living during this time then this method of financing your new business is certainly do-able.

9. Start a ROSCA group. This is an idea that’s been used primarily in developing nations but it might be useful in America now that the economy and lending situation is so difficult. The way that a ROSCA group (or Rotating Savings and Credit Association) works is that you form a group of people who are committed to a long-term loan investment in one another. The group meets once per month for an entire year and contributes a small amount of money at each meeting. At the end of the year, a single member gets all of that money to help them start a business. Then you continue meeting the next year and the money goes to a different person. You commit to continuing with this until every single member has the money they need to start a business.

Of course, there are pros and cons to this system. Some people will have to wait a really long time to get their money. However, that might work out. For example, if you have someone in the group who recently had a baby and wants to be a stay-at-home mom then it might be ideal for her to not take her turn at starting a business until five or ten years down the road. Other issues to consider are the true level of commitment people will have to the group and how feasible it is for you to hold up your part of the bargain of donations over time.

10. Find a Way to Start your Business Without It. The above options are all great options for finding the money that you need to start a new business. However, you may find that an even better idea is to find a way to start your business without a big investment. There are a lot of businesses that you can start with little to no money at all. If you’re concerned about making a big investment in your business then getting started with one of those types of businesses might be the right course of action for you.

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