Owning your own business is financially rewarding if you do it correctly. Getting started is one of the hard parts. You can take out a personal loan, but do you really want to start a business by going into debt? There are plenty of other financing options to launch your new venture.
Before you look into alternative financing, it’s important to have the right mindset. Patience is a virtue. If you operate impulsively or borrow because you’re desperate, you will fail. Set your goals realistically and build a solid foundation.
How to fund your business without taking out a loan
To set yourself up for success, try to follow one or more of these non-loan methods of funding a new business:
- Start a part-time business using your own money. Working full-time and maintaining a side business isn’t easy, but it’s a good way to avoid debt when launching a new venture. Take your time and build it slowly. Eventually, you can quit the full-time job.
- Pre-sell product before opening a physical location. This is also called a “soft launch” or “lean startup.” Spend as little money as possible and test the market by pre-selling some of your products. If you’re successful, use your profits to build the business. If you’re not, use your learnings to learn and improve your idea.
- Rent a room in your home. There are some obvious disadvantages to doing this because you’ll have to share your home with someone who might be a stranger. Despite that, the extra income could be enough to start a new business.
- Look into crowdfunding options. Depending on what type of business you’re opening, there may be crowdfunding financing options available through websites like Kickstarter, GoFundMe, or Indiegogo. Do an online search for more options in this category.
- Apply for grants. You don’t have to be a non-profit to get a grant. With the right idea and a list of available grants for your industry, you could get all the funding you need to get your business started. Like everything else on this list, it just takes a little research.
- Take on a partner. Couple your great idea with someone else’s money. There are plenty of other folks out there who share your dream of being a business owner. Ask around. Perhaps a family member or close friend would be willing to finance you.
- Open a line of credit at the local bank or credit union. This is different from taking out a personal loan. You’ll still accumulate debt, but only as needed. A line of credit can be used to buy materials and products for manufacturing.
- Apply for a home equity loan. This is also debt, but it’s secured debt because the equity already belongs to you. All you’re really doing in this case is converting that equity into usable cash. Make sure your business plan is solid before you do it—after all, you would be putting your home at risk if you default on the loan.
- Enter a contest. There are competitions for start-ups that offer cash prizes for the best idea. Join some local business associations and look for promotions for contests and competitions. You could win some money if you’re good at what you do, and at the very least you’d be getting good exposure. Don’t sleep on those networking opportunities.
These are just a few ideas to help get you started. There’s always money to be had for start-up businesses if you do your research and have a solid business strategy. Once you’re rolling, there are also creative financing options available from your local bank or credit union.
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Author: Guest Contributor