Starting a small business can be a challenging task, but with the right amount of planning and preparation, it can also be an incredibly rewarding experience.
One of the most important things you will need to do before starting your own business is secure some startup capital.
Some challenges will make getting funding difficult, such as finding investors who are willing to fund a startup that is not yet “profitable”.
It can be hard for entrepreneurs to navigate their way around the challenges that come with working with investors and banks because there are so many obstacles.
It may seem like a daunting task, but it is possible to obtain what is needed to start your business right away.
Different businesses have different needs, so it is important to research those needs so that you know what you will need to do to start a small business.
What Is Startup Capital?
Funding money is what you need to start a business. A small amount of money can be enough to get things started, but larger sums of money are also needed if you want your business to grow and develop.
For example, if you want things such as working capital, inventory and payroll then a monthly loan would be ideal for your venture.
A small business loan is easy to acquire if you have a decent credit score and some collateral, or a cosigner with a good credit score.
Here are some ways to get startup capital.
1. Fund Using Your Personal Savings
One of the best ways to get funding is by using personal savings. You need to have the money in the bank or on deposit somewhere else, so you have to make sure that it is available. The good thing about using savings to get funding is that you can use it to acquire the money that you need. For some people, their “Personal Savings” is a little more than they want, while others find that they need a little extra.
Personal savings can be used to fund your business in several ways; for example, use it for working capital and payroll, or even as an emergency fund. When starting up a small business, you never know what might happen, so it is best to have some cash on hand in case anything does occur. Here are some tips on how to accumulate personal savings.
- Self Discipline
Saving money is all about self-discipline. You must practice self-control to save money and refrain from using it for other purposes. To do this, you have to stick to a budget. It will help you know what your spending habits are. If you are not the type of person who is good with self-control, then you may want to consider getting a money-saving app that will help you be more disciplined.
- Set A Goal
If you don’t know what your goal is then it might be hard for you to save money. If your goal is to save up $10,000 to start a small business, then that is what you need to focus on (not necessarily the business). By setting a goal you will be able to look at it daily and know if you are making progress. Try to find a small business that will help you achieve your goals if you need help getting the money for startup capital.
iii. Bigger Budget
If you are currently living paycheck to paycheck, then switching to a bigger budget might be what you need to save more money. If your current income isn’t enough for your needs, then lower your expenses by cutting out some of the things that you don’t need.
- Automate Your Savings
You can automate your savings and deposit each paycheck so that you don’t even notice that it is missing from your checking account. It will save you the hassle of having to sit down and write out the check each month. You have to be careful, however, because it may be too easy and you may end up spending the money before you can save it.
- Calculate Your Expenses
If you don’t know how much money you spend in a month, then it will be hard for you to save up your startup capital from your regular job. You will want to either keep track of your expenses or figure out a way to do it automatically so that everything adds up. For example, you can use a program to track your expenses or you can ask someone else to do it for you. If you keep meticulous records of your expenses then it will be easy for you to figure out what needs to be cut out to save up the money that you need. One thing that is important when calculating your spending habits is knowing where all of the money goes. For example, everyone will have daily expenses such as gas and groceries, but there may also be monthly fees that must be paid. You might also want to add a couple hundred into your savings account each month.
2. Borrow Money From Family and Friends
If you have family members and friends who believe in your business and want to help you out, then they are great people to go to because they have the best intentions. They can assist you in starting your small business by giving you a new line of credit, a cosigner, or even by giving you some cash. You should make sure that they are okay with it before you accept any funding from them, though. You need to be careful about borrowing money from family and friends because sometimes it can cause tension between everyone. To be successful in asking for funding from family and friends, here are some tips.
- Avoid Asking For Too Much
Your family wants to help you, but they are doing it out of the goodness of their hearts. They might be able to give you a small sum of money or even just something that you can use to buy inventory or pay your taxes, but it isn’t likely that they will give you a large amount of money. This can cause stress between everyone and make them feel like they don’t trust each other anymore.
- Be Grateful
If you do receive a large amount of money for your business then you need to be sure that you are grateful for it. Show them how much you appreciate it by making the repayments on time and keeping in touch with them.
iii. Pay Them Back
If you borrow any amount of money from family or friends, make sure that you can pay them back as soon as possible. This can help to build trust and make things better for everyone. Keeping those relationships healthy is important for your company and you.
3. Borrow Money From Banks
Banks have lots of money sitting around as deposits or in their reserve funds, but they are not always willing to lend it out to you. You might be able to get a small amount of startup capital from them, but it will be more difficult than if you were dealing with a relative or friend. You should take the time to talk with the bank’s lending department and find out how much they are willing to lend you. When you do a little research then you will find, that some banks offer small business loans that you may want to look into if you need a large amount of money. Here are some tips on how to start up a small business with startup capital from banks.
- Get A Co-Signer
If you are good with credit, but not with collateral, then you can try getting a cosigner. It will allow your bank to lend you more money than they normally would be able to because they know that the other person is willing to help you out. It won’t be difficult to find someone who will sign a document agreeing to pay back the loan if you don’t, but it also shouldn’t be difficult finding someone who will charge an interest rate that is higher than your own. Make sure that you still make good on your end of the deal so that the other person will want to help you, otherwise they may get nervous and try to get out of the deal at any cost.
- Don’t Borrow Too Much
If you don’t have any collateral, then it may be hard for your bank to lend money to you. They know that if you don’t have enough finances to back up the loan then they will lose money when trying to collect on it. It is better to do a little bit at a time rather than too much. Also, don’t make any payments for the first few months after you get the loan. The bank will have to take half of the money back at that time if you don’t pay it back.
iii. Improve Your Credit Score
When it comes to the Credit Score matter, you must have a good credit score before you get your first business loan. This will make it easier to get the higher interest rates that banks usually offer. In most cases, your credit score will be based on the financial transactions that have occurred in the past, and having less history can make it difficult for you to get a good score. Here are some ways that you can start up a small business with startup capital and improve your credit score at the same time.
- Have a Business Plan
Having a good business plan is important when applying for a loan. Having one put together in advance would be ideal, but it could still be done in the middle of the process. It will show the bank that you know what you are doing and that you are willing to do whatever it takes to get your small business started successfully.
- Find Out How Much You Can Get
If you have decided to take advantage of getting a loan from the bank, then you need to find out how much money they can give you. You can do this by talking to them and asking how much they can lend you, but in many cases, they will not be able to give you the amount that you want. This is why you must have a business plan to go with the application for your loan. This will give the bank an idea of how much money you need and what it will take for them to lend it to you.
4. Use Government Grants Programs
There are some government grants available for small businesses. They are usually only open to businesses that are located in a specific area or are in certain industries. The grant money is supposed to help you out and get your business started. You will find that it is easier for you to get some assistance from the government than from private organizations and banks. If you want to start up a small business with startup capital from the government, here are some tips that may be useful for you.
- Find Out The Requirements Of The Grant
You won’t be able to receive any of the grant money if you don’t meet all of the requirements that they have set for you. The money is for people who are starting up a small business and it will only go to those who are trying to help out an area that needs assistance or who work in a depressed industry. The money can also be used to create new jobs in the area where you are working in. If you want to start up a small business with startup capital from the government, then make sure that you don’t miss out on any of their programs.
- Fill Out The Application
You will need an application form when you want to get the grant money, but there is no need to fill it out right away. You will want to make sure you have everything figured out before you bring it into the government. The application can only be filled out once, so if you want to start up a small business with startup capital from the government then make sure you do this over the phone or by email.
iii. Be On Time With All Of Your Payments
Once your application has been accepted, then it is time to make sure that you keep the payments on time and don’t miss any of them at all. You must keep your government grant money in business and make it easier for you to get started. This can be one of the best options for small businesses that need startup capital, especially when it is difficult to find any other funding.
- Submit All Of The Required Reports
One of the requirements will be submitting reports on how you spent the government money and what you have done with it so far. You may be able to use the same organization or person to complete the reports and keep an eye on everything that is going on. It will show that you are trying to do good with the money and it will help you in getting another government grant in the future.
- Get Help From An Advisor
Some people have learned how to get government grants who can work with you and help you out in filling out an application, providing advice, and making sure the application process goes smoothly so that you will get approved. This can be one of the best options for small businesses that will use startup capital and need to get loans, especially when it isn’t easy to find any other funding.
5. Funding With Microloans
Even the smallest of businesses can sometimes need a little bit of help from other financial institutions to get them off the ground. This can be done through small loans and microloans, which are much smaller in size than a traditional loan. They can be used to help a small business start up a new business, take out an existing one, or expand its operations. The fun thing about these loans is that they are often given out by nonprofits and government agencies. Once the business has been established for a set amount of time, then it may be eligible for more funding.
6. Venture Capitalists
Venture capitalists are one of the best places to look when looking for startup capital for small businesses. These are investors that put their money up for a company in hopes of seeing it grow. Large businesses and corporations need venture capitalists just as much as small businesses do. Even though they aren’t going to give out as much money as banks or government programs, they do have more freedom in choosing where the funds go. They also have more experience with many different ventures and make it easier for you to get your business started. To be successful at finding venture capitalists, you need to know the following:
- Know Your Business
If you want to start up a small business with startup capital from venture capitalists, then you will need to know your business. You will also want to be able to tell them what they can expect in return on their investment if they do choose to give you the money that you are requesting. You should convince and explain why they should invest in your business and how they see it growing in the future.
- Identify The Right People
The most important thing that you can do when you want to get venture capitalists to back your business scheme is to identify the right people in the company. The key is to pick people who are interested in your type of business and who will be able to see how it could be successful. You need to make sure that they are a good fit for your needs because they can help you or hurt you, depending on what they choose.
iii. Learn About The Venture Capitalist
The best way to learn more about venture capitalists is by talking to people who use them often and find out how they feel. They may be able to recommend someone and make it easier for you to get what you need. It is also important that you meet with them in person because it can help to start a good relationship right away.
- Make A Business Plan
You won’t be able to get venture capitalists interested in your business if you don’t create a good business plan for them. It is possible to get help in creating a business plan and making one that will help the venture capitalist to want to invest in your business. You want to make sure that the business plan is detailed and easy for them to understand.
7. Crowdfunding Sites
Crowdfunding is used by thousands of businesses right now and this is one of the best ways for small businesses to get startup capital for their venture. Some of these sites are even run by government agencies that are hoping to help entrepreneurs in need of funding. Many different sites have been set up around the world, so it should be simple for you to find one that will work for your needs. The key is to make sure you go through them all and look at all of the details before making your final decision. To be successful at getting funding on these sites, you need to do the following:
- Understand The Fees
Most crowdfunding sites will charge a fee for each project that you are interested in using their services for. Some are much lower than others, but you will want to make sure that you find one that is within your price range and fits your needs. While it is important to save money when you have startup capital at your disposal, it is also important that a business can make ends meet. Try to find one that will work for both of these needs.
- Use The Site For Online Campaign
When you are trying to find crowdfunding sites, you will want to search for one that allows you to set up a crowdfunding campaign right on the site instead of having to go through the website. This can make it much easier and faster for prospective investors and it makes using the site more efficient for everyone involved. Using an online campaign can also help you to make sure that you can reach a wider group of potential investors which will lead to more success. You must put in the effort to do this as it can increase your exposure and will allow more people to see your goals and progress.
iii. Be Prepared To Answer Questions
Once people start looking at your business plan and decide that they like what they see, then you need to be ready for questions. Questions can come from anyone and you don’t want to have a negative experience with anyone because someone decided that they weren’t interested in doing business with you. If the question is asked, then answer it honestly and try to make the person happy by providing what they need or even more. This will make the person feel that they made a good decision in choosing your business over the other one and will be much easier for the person to work with.
Final Thoughts
The best way to get startup capital for your small business is to look at a few different options and make sure you find one that fits your needs. You can do this by looking into venture capitalists and the different ways that you can secure them for your business. You will want to focus on finding one that is interested in what you are trying to start up and one that will see how it could grow in the future.
