Every business needs some time to establish its place in the market and create smooth cash flow. But, till that time, you need to rely on other funding sources and bear day-to-day business expenses such as wages payment, inventory buying, and other operating expenses. Therefore, you need solid backup plans to support your business when working below the break-even point.
In the write-up, we came with the most affordable business funding plan. Following them can help to support your business, even when your business is not generating adequate revenue.
Nine practical ways for small business funding
1. Start with self-funding
Most small businesses start with self-funding plans. It involves fewer chances for losing money, and even if something happens adverse to your expectation, you will not pay back to anyone. Therefore, it is considered the safest choice for every newbie in the business world. You can invest your personal savings, use life insurance, individual retirement plans, and shares, or other investments to fund your dream project. If you use life insurance funding, your beneficiary will get an after deduction amount. The best part of using self-funding is that there will be no liability created to pay off in the event of a loss.
2. Equity funding
Equity funding is available for major business players that are getting great returns on their investment. A business can invite applications from the general public and offer equity shares in exchange for money. Some of the business call amounts in one go, and others use different payment methods called call money on shares. So, if your business is getting good profit and you can also invite equity investors into business, read your state or federal guidelines before offering shares in the market.
Equity funding can also be for business startups. You can borrow money from friends and family for business purposes and offer equal rights to participate in major business decisions. This type of funding is most common in family businesses when the business winds-up, the asset is divided into equity shareholders in equal proportion after liabilities payments.
3. Business grants
Depending on your business nature and needs, you can also be eligible for state or federal government grants. The major advantage of these grants is that you will not have to repay any amount to anyone. Because the motto of the government is to promote specific regions or business products, therefore you can get a handful amount of money and clear your everyday expenses. Do you just need to do good research work whether your state or federal government is offering your product or service grant or not? If yes, how can you take advantage of it?
4. Small Business Loans
If you have a good credit rating, you can apply for small business loans. Many lenders offer business funding in the way of loans to your business at a very affordable rate. Even if you have bad credit, you can also look for their services and learn how to improve your credit score. Remember, small business loans are offered for business growth and development purposes. Therefore you need to submit documents carefully with business plans. The best part of these loans is that you don’t have to share profit with anyone in any way. Just paying a fixed amount of installment can help your business to grow.
5. Moonlight Funding
Moonlight funding is a new option in funding but involves old techniques. You will have to work hard for your business and join another part-time potion to support it. This is a simple technique and does not put a burden on your business to pay funds. You can start with short-term online projects and support your business finances.
Crowdfunding is a specific form of business investment where people invest, or other small businesses raise funds to support a project. In this funding scheme, you can invite strangers to contribute to your business. Keep in mind, to invite crowdfunding, you need to create an impressive presentation either in video or ppt form and define your business goal. If the people love your idea, they will support your project by investing money. It could be in the way of rewards, donations, debt, and equity. Remember, the chances for crowdfunding are very less, as you need a solid presentation and skills to implement your plans.
7. Home Equity Loans
Home loans are the quickest source to raise funds for your business. You have to select a bank or financial institution that considers your home and offers a loan amount. Bear in mind, this is one of the riskiest types of fundraising, as you need to be regular for paying EMIs. If you missed any, there would be a great penalty, and you may lose your home too. So, if you are very confident about your plans, you can consider home equity loans, otherwise do not try this and go with other options.
Many businesses use pre-sales funding techniques to raise money. Under this, businesses, before manufacturing any material, sell clients at sales price. The amount can be called in equal installments or full in advance, depending on need. This type of funds-raising option is mainly seen in real estate, where builders sell their apartments before or during the construction phase. It serves the business to buy raw materials, pay laborers, and supply projects, goods, or services on time. This is highly suitable for projects with a short supply chain and clients have to wait for less time to get their product.
9. Trade Credits
The next biggest option for business is to look for trade credits. You can seek assistance from wholesalers or retailers to supply goods on credit for a certain time. Generally, a 30 days trade credit period is accepted by creditors. You can extend it depending on your relationship with vendors. This option works best for concern having no money option. You can also choose it, just need to have good relations in the market and vendors.
Hope the above option helps you to choose the right business funds option for your project. So be smart and choose the right option. Even if you are struggling with bad credit, take expert assistance to improve your credit card score.
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