10 Business Financing and Capital Options for New Startup Businesses

personal savingsEveryone loves to be their boss and no doubt many have entertained the thought of entrepreneurship. Life has a way of presenting challenges to individuals where one has an excellent idea but no start-up capital while another has the capital but with no idea what to do with it. However, to those determined to venture into business and have challenges getting started due to the scarcity of money, here are ten practical ways you can access this precious capital.

  1. Personal savings

Smart employees value savings. You are in the red if you consume all you earn. Those who have worked for some years and have had the sense to save find themselves in the delightful position where they can easily finance their businesses.

  1. Family and Friends

You may be lucky to be surrounded by friends and family who are willing to grant you a start- up capital at very low-interest rates or no interest at all. You can also sell them shares in your business idea only that disputes sometimes arise when one shareholder wants to control the business, so you are better off taking the money as a loan. The advantage here is that you will not be under undue pressure to pay up as would be the case with traditional banks. This option should, however, be your last resort since family squabbles may arise should you fail to pay up.

  1. Online borrowing

The digital platform has opened up a plethora of opportunities including finance and capital. Several sites offer loans depending on one’s credit rating. One such site is Peer-to-Peer where you can borrow up to $35,000 from total strangers. To qualify, one’s credit rating must not be less than 620. One disadvantage is that interest rates are understandably high (12-25%) because of the huge risk factor involved.

  1. Business credit cardscredit cards

Consumer credit cards are typically discouraged due to the compounding effect of interest rates if one delay or fails to pay up on time. However, you can apply for business credit cards whose interest rate is lower. These cards have been found to be cost-effective. Promotions and cash back rewards will earn you further credit for your business. Further, solid business credit will enable you to access more financing in future. However, as stated, failure to pay could lead to massive fines that could eventually shut down the business.

  1. Microloans

With the proliferation of Micro-finance companies, more start-up capital is available to as many people as possible. Microloans are meant for small investors who do not qualify for mega capital from traditional banks. The advantage of micro-finance loans is that the interest rate is usually lower than traditional banks making it easier to repay.

  1. Equity home loan

If you own a home, you have the option of borrowing against it. This provides a very easy way to finance your business. This method will also ensure that you are the sole owner of your business. The downside of it however is that if the business goes awry and you are unable to finance the bank loan, you could lose your home, a double tragedy.

  1. Angel investors and venture capitalists

You may have a great idea, say installing Eco Toilets in lucrative areas but lack the phenomenal capital the business requires. You may turn to angel investors, wealthy individuals who invest large sums of money. When this happens, be aware they will want to have control over the business, which is understandable. To be on the safe side with angel investors, offer a convertible note; a loan that pays interest but converts into stock under certain conditions. Venture capitalists, on the other hand, are the wealthy looking for greater returns on their investments, 10-15 times more in a five-year period. Such terms are usually not favorable to small investors.

  1. Disposing of property

A much easier way for a start-up for small businesses is selling off a property. This works for you since you get your capital without involving others, and you become your boss. The only challenge will be if the business goes under!!

  1. Retirement Duessmall busines

For those retiring, this is it, and it must work. Hence, you must be doubly sure that your business idea will flourish. Seek the services of a professional.

  1. Grants

Some organizations offer grants to brilliant business ideas that add value to the society. Such fields as medicine, agriculture, the environment, etc. attract funding if you can demonstrate sustainability and value addition.

You are the only person holding yourself back, as far as starting a business is concerned. The options for financing are so many for you to choose from.


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