To start a new business cost money. How much money you need depends on the type of business you are going to start. The more money you need to harder it will be to find financing. Especially if you do not have a proven record as a successful entrepreneur.
Shoestring it
I recommend that you start by trying to figure out what the least amount of money you need is. What expenses can be reduced, Which can be eliminated completely. Your original plan likely contains things that you do not really need. Go through over and over utl you have discovered what the smallest amount of money that you can work with is.
Knowing both how much you should ideally raise and how much you need to raise gives you more confidence while raising money. It allows you to know the business better.
Start small
I usually recommend that you start small and that you start your first business on a small budget. This allows you to get started right away and allow you to learn business without having to risk a lot of money. Start a small company and consider it a training company that allow you to do bigger things in the future. The company might grow large. But if it doesn’t you will still earn valuable experiencing.
Saving money
If you want to start a small business then you will only need a small amount of money. A few thousand is enough to get started. Most people can save this over the course of a couple of month if they work overtime or an extra job. Doing this will require a lot of sacrifices but is a great way to get started with a new business quickly.
Another option is to try to save a little money each month until you can save enough money to be able to afford to start a company. This might take a year or two if you do not work extra. If you need a lot of money then this might not be a viable solution at all.
If you are saving money to be able to start a business down the line then I recommend that you start a small online business in the mean time. This can be done for less than USD 100 and allow you to earn extra money. Building websites can easily earn you an extra 10 k a year. You can earn a lot more if you work hard.
Side hustles
Try to earn money through different side hustles. This allows you to earn money and get you used to work hard. Try to have as many different side hustles as possible to make sure that you are always working and always earning money. This is a great way for singles to earn money but it can be harder to do if you have a family.
Investments and inheritance
If you have money already saved up and invested or if you received an inheritance then you can use this money to start a business. Make sure to plan the business careful and make sure that you are sure about your numbers before you start your business. You need to earn a higher return then you do on your investments for it to be worth to start the business and the business needs to be profitable even if you do less business then you expected.
Equity in your house
If you have owned your house for a few years then you might have extra equity in your house. This equity can be used to get a second mortgage. You can use the money from that mortgage to invest in your money. This is usually the cheapest way to finance your business. You will be able to get a low interest rate and the monthly payments will likely be a lot smaller then they would be if you used another type of credit.
Taking out a second mortgage means that your house is security for the loan. It is important that you make sure that you can pay the mortgage each month so you do not end up loosing your house.
Personal loan
Most people can get a personal loan for 10 000 or more. This is enough to start a small business. A personal loan is an unsecured credit. This means that the interest rate will be higher than it would be if you took out a second mortgage. The monthly payment will also be higher since the loan needs to repaid faster. Personal loans is despite this a good option.
Investments and loans from family members
Never accept money from friends or family. Regardless if it is a loan or an investment. If you despite my advice chose to involve your family or your friends then it is very important that you write a contract that specify if the money is a loan or an investment. It is also important to clearly state whether or not this gives the family any say in how you run the business.
Investors
If you need a lot of money then you might have to look for outside investors. Finding investors can be complicated and we will cover this topic in depth in a future article.