How to Fund a New Business

The question of how to fund a new business is one that any entrepreneur will ask his or herself sooner rather than later.

After all, how are you going to be able to do anything in the world of business without the right funding to get the wheels in motion?

Think about all of the things that a business needs in order to run and you’ll quickly see why it’s important that you not just secure funding for your enterprise, but that the funding you secure will be enough to help see your business through its formative period once it’s up and running.

You need start up funding to cover things like:

  • Equipment
  • Payroll (if you aren’t the only person involved in running your company)
  • Licensing
  • Office space
  • Insurance

The costs don’t end with just these essentials either. While you may be able to find more cost effective alternatives in many instances, not including any one of the important aspects of business operation could ultimately mean that your company ends up suffering in the long run.

So how do you fund a new business, knowing that it involves so many different aspects from the start?

Well, let’s take a look at some of your options.

You Could Get a Bank Loan

Many entrepreneurs go the traditional route when funding their startups by appealing to banks for loans or lines of credit.

Money extended to you by a lending institution like a bank can help get you started but, if this is the path you decided to take in order to secure your seed money, you need to be prepared.

Banks want to be sure that the money they extend to startups will be returned to them, which is why you need a strong business plan.

It’s no secret that startup businesses can be a gamble, so you need to have proof that your business venture is something that will be worth the lender’s trouble.

You Could Try to Apply for a Grant

For many reasons, grants are more difficult to obtain than loans when you’re looking to fund your business.

Funds available to distribute via grants are often very limited, as are the types of businesses that the federal government will extend grants to.

Grants can also be available through local governments and organizations depending on where you live but they often have many of the same strict reporting requirements as federal grants.

If pursuing a grant is an avenue you’re interested in when figuring out how to fund a new business, you should know that a business plan can help you much in the same way that it can with pursuing a loan.

The federal government wants to be sure that any money they extend to a new business owner won’t go to waste, so you want to come up with a plan that is as detailed as possible if you want a fighting chance at securing a grant for your business.

To learn more about small business grants, you can go to the official website of the US Small Business Administration.

You Can Try to Find Investors

When thinking of how you can fund a new business, have you thought about appealing to potential investors who can provide your company with startup capital?

Look for business-minded people who might take an interest in your enterprise and make them partners.

In this scenario, you may have to cede some level of control but you will get money to fund your company, so it’s up to you to determine whether or not that trade off would be worth it in the long run.

You Could Try Contract Work

Starting and running a business, even planning to do so, is a full time job. In figuring out how to fund a new business while it’s going, you might not have time for a traditional 9 to 5.

Depending on the size of the company you plan on starting, however, you may be able to use money that you earn through freelance and contract work to supplement money that your startup brings in.

The flexibility of freelance work means that you would be able to dedicate a good amount of your time and energy to running your company while gathering some extra revenue at the same time.

Finding the Method That’s Right for You

While there seem to be countless answers to the question of how to fund a new business, the options listed here are some of the most widely practiced among entrepreneurs who want to find the right amount of funding to get their business ventures going.

It’s important to remember that anyone who was a stake in your business wants to be sure that they won’t end up losing anything on the deal.  Therefore, your investigation into how to fund a new business should include some reassurance that stakeholders will come out on top at the end of the day.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more information on business analysis, business planning, and ways to grow your small business profitably, please check out our website www.portalcfo.com.  Follow us on Twitter @portalcfo

Sign up for our weekly blog email update to stay tuned for details on our upcoming teleseminar for maximizing profits in your business.