Getting money to start a business is one of the trickiest aspects of the whole process. Here are some suggestions for getting the financing you need.
1. Earn it yourself
Though this is one of the hardest to accomplish, it is by far the best option in the long run. You won’t need to pay back interest on your own savings and you have complete control over how the money is spent. Saving enough money for a start-up means staying with your full-time job and saving every penny you earn while you evolve your business in your free time. It is hard, but doable, depending on the type of business you want to start.
2. Borrow it
Most people finance their businesses by taking loans from a bank or another lending source, like a fellow business or family member. This makes sense for a business that needs a large amount of start-up capital to pay for materials and equipment upfront, and for people who have assets, like property, that they can offer as collateral. You will need to write a detailed business plan before the bank fronts any money. Another good solution is to take money out of your bond, since the interest rate is lower. Remember that you will need to pay back the money with interest in a set amount of time. If you are dealing with an acquaintance, you will likely get much better and more lenient terms.
3. Beg it
If you are audacious enough, simply ask for money! Pitch the idea to friends, family, business partners and anyone else you can find and ask them to give you as much money as they can afford. Of course, this strategy works particularly well if you offer them a percentage of profits based on contributions, or shares in your business.
4. Get an investor
If your business idea falls into the emerging or social-benefit fields, notable technology or education, try to find an investor who is willing to take a chance on you. Investors often have considerable sums that they want to channel into promising, well-planned and well-considered ventures, though there may be quite strict conditions attached on how and when you spend the money. Investors will generally also ask for a share of your profits.
5. Work together
If you can’t manage to finance a business on your own, see if you can find one or several suitable business partners to club together with you and to run the business as a joint venture. Not only will you share costs and risks, but many minds are better than one, which means you can come up with better strategies and share business tasks like accounting, marketing and development.
The University of Cape Town (Law@Work) Start and Manage a Small Business course starts on 6 August 2012. For more information contact Amy-Jane on tel: 021 685 4775, email: firstname.lastname@example.org or visit: www.getsmarter.co.za.