As per the studies it has been found that around thousands of people launch their own business, but only a few manage to strive in today’s cut-throat competitive market. At the same time, it has been found that most of the businesses do not employ any staff or employees and the owner is the sole person who takes care of the entire show.
Further studies have revealed that only 50% of the businesses manage to survive for five years. One third remain in active mode after their first ten years. Despite all the odds of success, a small handful number of businesses manage to strive and transform into midsize businesses. And, only a microscopic fraction manages to become the legends.
How to Fund Your Business?
Before you even think of becoming a legend name in the world of business, it is essential that you find the ways that will help you to finance your business plan. You need to draw the rough sketch of the total fund that you require to launch your business. For this, you can use an online startup cost calculator, which is readily available at various websites. There are multiple options available when it comes to financing the startup companies. Without further ado, let’s find out the ways which can help you to raise money for your business plan.
Self-financing your own business is relatively easy, but it comes with the huge downside. If the venture does not seem to work out, then you are entirely on the hook. Still, this can be an amazingly attractive option. So, if you are in the position to meet your business funds, then go ahead.
Moreover, if you fund from your assets, then it will save you from repaying back even after you close down the shutter of your business. Repaying back the principle along with the interest amount to the lenders become difficult when you have nothing in hands after closing down your startup. Funding from your source can save you from this hassle. Let’s check out some sources of self-financing below:
Sharing Personal Assets and Tapping your Savings
You can finance your business by tapping on your piggy reserve. It doesn’t matter whether the fund comes from you on checking account or family inheritance – it is your own money. It is a popular method of financing your business and also demonstrates the commitment of the owner to other investors, which can help you directly to get additional funding from the third parties.
You can sell your stocks real, estate and bonds as well as valuable family heirlooms. You can raise cash in order to fund your business in this way. It is no doubt a time-tested way of raising capital for business funding but be aware of the tax implications that are linked to selling certain types of assets, especially stocks and real estate.
Cash Available in your Retirement Accounts
The funds available in your 401K or IRA might look to the very tempting as a source of cash, but in case of early withdrawals, it may lead to high penalty charges. However, specific plans are promoted by financial advisors who claim to permit individuals planning to launch new businesses for potentially avoiding these penalties.
You can do it quickly by rolling over the funds in the existing 401k plan into a new plan that is created by the corporation. The new company owner can invest the funds available in the 401k in the company stocks. Popularly known as ROBS, these kinds of plans are promoted online, especially those eyeing for franchise opportunities.
You can use your credit card for funding your business needs, provided that you have an adequate limit. But this is highly risky because if you cannot payback timely, then it will lead to several hassles. It will also lead to falling in your credit score and even if you somehow manage to settle down with a certain amount by declaring bankruptcy, still, it will close your doors for getting credit from the market in future.
Peer-to-peer loans or p2p loans means borrowing a certain sum of money without the need to undergo traditional investment company or bank. Under this funding method, a loan request is posted by the borrower on the p2p platform. It includes the desired loan amount as well as the reason for the same. The application is reviewed by potential investors who agreed to fund the borrower up to a specific desired amount.
After the loan has been funded, the total amount is received by the borrower who pays back the same in the form of monthly installments. The borrowers made the payment to the platform, and the same is repaid to the investors on the amount that has been lent. Taking this kind of debt can help you to manage a huge sum of money. You can get in touch with multiple lenders on the platform.
If you have a strong business idea but requires help from the aspect of guidance and money for setting it up and running successfully, the business incubator can help you out.
As the name suggests, business incubators are organizations dedicated to providing services along with the required support to fledgling businesses. Business incubators are generally operated by government agencies, venture capital firms, and Universities. They support new business throughout the initial stages by providing infrastructure, networking, marketing, and financing assistance.
As a prospective business owner, you need to undergo a lengthy process of application to join the incubator program. The requirements of entrepreneurs differ a lot, but the likelihood of business success need to be demonstrated by the entrepreneur. The competition for acquiring a spot in an incubator can be tough.
I have already discussed some of the ways that can help you in arranging funds for your business. But will personally advise that you prefer the self-financing option. It will save you from the hassle of the lenders in case of bankruptcy.
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