These are exciting times for entrepreneurs in the U.S.
A recent study by Babson College showed that there are now 27 million entrepreneurs in America.
If you’re one of them, and you’re wondering how to fund your small business, but don’t know how to obtain the financial support to do so, below are some ways to get funding early on so you can get started on the right financial foot.
If you’re only in need of a small amount of capital to start off your small business, you might consider asking a family member for a loan. The downside to this, of course, is that borrowing money from a family member may change your relationship with them, especially if you have trouble repaying the loan on time.
To avoid this situation, show your family member a detailed plan of exactly how you will use the loan. Offer to pay them back with interest, and create a contract and payment schedule. These steps will show them that you’re serious and that their money will be spent wisely.
Small business loan
Many lending institutions offer small business loans to help entrepreneurs in the first stages of a startup. You can use this loan for things like purchasing equipment to hiring employees to marketing campaigns. Typically, you will need excellent credit to obtain a loan like this, and there are other requirements, so do your research. If you don’t qualify for a small business loan, try applying for a personal loan at a bank or through a peer to peer lending institution.
The truly best way to begin your business on a solid financial footing is to cash flow it. That means that you will have to pay for your own business with the cash you have available. With this option, your business might grow more slowly, but you will also have the benefit of starting a business that is debt-free.
With this option, you can start your business on the side while you’re working full time. You work on your side hustle when you can and any time you turn a profit, you can reinvest it into the business while using your full-time income to pay your living expenses. Although from a scheduling perspective this method can be exhausting, it can also be incredibly rewarding when you grow your business enough for you to quit your full time job.
If you have a business idea that requires a large amount of capital that you can’t fund yourself, you have the option of seeking out investors. Investors have an interest in helping small startups grow, but in exchange they will own a percentage of your company and they will have a say in how you run your business.
Ultimately, there are many ways you can obtain the means to start and maintain your small business, and it’s important research all your options and find the one that works best for you. For people who don’t like the idea of debt, they might want to cash flow it. For those who want to grow the business quickly, they might want to seek out investors or a business loan. Either way, don’t make this decision lightly. Knowing the finances of your business thoroughly is one of the surest ways to make it successful, so proceed with caution and make the best decision you can to ensure your business will be there now and into the future.
This article was originally published on LendingTree.com on Dec. 15, 2016.
Content sponsored by LendingTree.