- You are here:
- Home »
- Business »
- How To Fund an Early Stage Business
How To Fund an Early Stage Business
(This is a contributed post)
Funding an early stage business can be a challenge, particularly with the current economic climate, as the majority of people are unable to get a loan from their bank in order to start a business today unless it is secured on their property; and many people aren’t in the position to risk their home; moreover, whilst you might be convinced your idea is going to make you a millionaire – you’re not just gambling your own money, you have the security of your family to think about too.
Essentially, raising capital to start a business is rarely an easy or comfortable task but it doesn’t have to be as painful as some people make it.
Unfortunately, entrepreneurs face immense emotional pressure and can end up working very long hours for little reward (at least in the beginning) and whilst they know the odds are heavily against them, they keep on keeping on, and the payoff can be absolutely huge!
If you’re reading this article there’s a good chance you have an idea that you know could make a difference to the world and transform your financial situation beyond all recognition – perhaps you’re sitting on the next Spotify or Uber, or maybe you’re just wanting to take your life to the next level by setting up a local yet highly profitable small business.
The one thing that makes entrepreneurs different to most people is their vision, focus and determination. All very admirable qualities that fuel success but without cash in the bank to fuel your cash flow, it can be very difficult to get going, or get to where you want to be – as having cash behind you is imperative, particularly if you are at the stage where you are preparing for your first trade show.
This article therefore looks at three simple ways you can fund your early stage business:
- GET A BUSINESS LOAN
The most traditional route for setting up a small business is to get a business loan such as a kabbage loan. This way you remain in complete control of your company, as you aren’t having to offer equity to external investors, who each get a say in how your company is run and a share in the profits.
- INVESTOR
Similar to how professional investors put money into start-ups in the TV show Shark Tank and Dragon’s Den for a proportional measure of equity in your business, your friends and family could become shareholders in your business, though it’s often much preferable to have a standard loan agreement set-up if you’re thinking of using friends and family to help you out.
The benefit an external investor can has, particularly if they are a business angel, is that they will often bring expertise, insight and contacts to the table in addition to the cash investment.
- FRIENDS AND FAMILY
If you have friends and family who are open to backing your business for a small incentive (such as interest on the loan or perhaps equity in the business) this can be a great option as it will usually cost less and be much easier to arrange than a bank loan or equity investment form an external investor.
However, be warned, as borrowing money from friends or family can come at a high social cost that simply might not be worth it.
