Once you have created a solid business plan, it’s time to bring the plan into fruition. Here are three of the most common ways to finance your business:
Family and friends
Hitting up family and friends is the most common way to finance a start-up. But when you turn loved ones into creditors, you’re risking their financial future and jeopardizing important personal relationships. A classic mistake is approaching friends and family before a formal business plan is even in place. To avoid it, you should supply formal financial projections, as well as an evidence-based assessment of when your loved ones will see their money again. This should reduce the likelihood of unpleasant surprises. Source: Inc
Crowdfunding is a relatively recent development in business funding trends, but you need to be careful how you use it. Platforms like Kickstarter and Indiegogo are readily available and easy to use, but that doesn’t mean just anybody can use them. Some platforms have specific requirements, such as Kickstarter’s mandate that you must be producing a tangible product and that you can only accept the money if you reach a specific goal. You’ll also pay a percentage of your micro-investments back to the platform where you earned them, and equity crowdfunding is a complicated, confusing mess of stipulations. Consider crowdfunding as a way to gain significant upfront capital, but don’t count on it as an instant and guaranteed way to cover all your capital needs. Source: TheBalance
Most entrepreneurs and small business owners these days have come to the realization that they will have to self-fund (also know as “boot-strapping”) their projects for a significant amount of time until more formal funding opportunities become realistic. There are many ways to accomplish this from savings accounts and zero interest credit cards to leveraging other personal assets. If you believe in your vision and have an absolute refusal to accept failure as an option, you should feel comfortable investing you own money into the business. In turn, this will make potential investors more comfortable knowing you have skin in the game. Just keep your eye on profitability! Source: Forbes
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