The backbone of any profitable company is its customers. Customers who are ready to spend with the young business and give it the returns it needs to get off its feet and grow.
However, for many small businesses, getting enough customers can be an uphill task in the beginning. Most of the capital has already been invested in market research and product development, but then you realize that customers aren’t very eager to buy from a new business that they have never heard of.
Customers only buy from brands they trust, and earning customer trust takes time. So, while you continue working hard towards increasing your customer base, here are seven ways you can finance your business to keep it afloat long enough to start bringing in profits.
1. Leverage your credit card to fund your young brand
Credit card loans are an easy way for entrepreneurs to finance their startup. However, they come with a lot of personal risk for the business owner.
If you have maintained a good credit history over the past few years, you can take a credit card loan that is big enough to kickstart your business before it turns profitable.
Since very few financial institutions are ready to offer loans to businesses that are just starting out, the best way to fend for yourself without selling a stake of your business is to use your credit card. However, if your business fails before returning all your money, then it is up to you to deal with your credit card rating and pay the loan yourself.
2. Crowdfund the funds needed to keep your startup afloat
Crowdfunding a business means convincing a large number of people to contribute small amounts of money to your venture.
The growth of the internet has made crowdfunding business capital easier by providing multiple platforms such as Kickstarter, GoFundMe and Fundly. These platforms allow startup founders like you to describe their businesses to a large group of people and convince them to become contributors.
Apart from raising more money for your startup, crowdfunding increases your brand’s visibility by showcasing it to millions of people who are active on these crowdfunding platforms.
The thing to keep in mind is that crowdfunding is a very competitive grown. You have to bring your a-game when selling yourself. The upside is that raising capital this way safeguards you from selling a stake of your business to loan lenders and investors. You raise the funds you need while remaining in total control of your brainchild.
3. Tap into your retirement fund
Using your retirement fund such as your 401k to fund your business sounds fun and easy to many people. You’ve already earned the money, so what’s the fuss?
The problem is that funding your business through your 401K is a complex process that if done wrong could land you into trouble with the authorities.
There are three ways to use your retirement fund to fund your startup:
- Borrowing from your 401K. This is like taking a loan from your own money and has to be repaid within a fixed duration
- Rollover for business startups (ROBS.) A ROBS grants you permission to use a portion of your retirement funds to finance your business. The funds are not a loan or a withdrawal, from your fund, so you don’t have to pay it back if your business flops.
- Cashing out your fund entirely. Cashing out means withdrawing part of your retirement for personal use. The withdrawn money immediately loses its tax benefits and can be used for just about anything you deem fit. You don’t have to pay back a single dime of the money.
There is much more to using retirement funds to finance a startup through your retirement fund. Lots of tedious paperwork is involved, and it may take a while before you can access the funds. Also, what works for one person may not be the best choice for you. So the best approach is to get some professional help first before digging into your retirement fund.
4. Take a startup loan to fund your startup
When your startup is stuck financially, a startup business loan may be your best shot at getting yourself unstuck.
Small startup loans are loans geared toward young startups with little to no business history. These loans are suitable for young enterprises whose short life and little financial history get in the way of their getting bigger loans from banks and other major lenders.
Microloans and SBA (Small Business Administration loans) are two of your best bets since they are easy to qualify for and have favorable terms.
5. Adopt Forex to generate quick returns to fund your business
Many people love forex because it requires very little capital to start. With as little as a hundred bucks you can set up an account with a reputable forex trading platform within minutes. From there, a little research is all you need and you are on your way to making profits.
Forex can be a reliable source of income for you. It can give you the extra cash needed to finance your business as you work towards increasing your customer base. To make forex work for you, start by learning the basics of how to make profits from forex and avoid the common pitfalls that lead most people into losses.
If you are unable to get a loan and don’t have enough savings, forex may be the golden ticket you have been waiting for to finance your startup and grow.
6. Attract an angel investor to take you the extra mile
Angel investors are individuals willing to invest in young startups in exchange for a stake in them.
Unlike venture capital firms that only invest in established startups that are already profitable and show great promise, angel investors are more understanding and are willing to put their money into anything that piques their interest.
Since they are not answerable to shareholders, they can invest in any business even before it becomes profitable. All they need is a little convincing and they will invest in your startup.
Also, angel investors don’t invest in hundreds of businesses. They are choosier in where they put their money. This type of cherry picking means that they are invested in your growth and progress and can offer you a helping hand whenever they can.
7. Find a business partner to take some load off your shoulders
Many entrepreneurs overlook partner financing since they would rather be in total control of their businesses than ‘lose the control‘ when they partner up.
However, strategic partner financing is crucial to the survival of your startup especially when you ran into financial hardships. Unlike investors who let you do all the heavy lifting but share the profits, partners work with you for the mutual growth of your enterprise. Since they have a stake in your startup, they are more motivated to drive the growth of your business.
You could decide to partner up with an individual and share both the profits and some responsibilities. Alternatively, you could partner up with another company in exchange for the rights to your product, your employees or any other of your assets. Either way, you reap the benefits of extra help and extra capital for your startup.
8. Prioritize your finances to avoid startup failure
With 29 percent of startups failing because they ran out of funds, you cannot gamble the future of your startup by waiting for it to attract enough customers to earn profits.
Take charge of your finances first, and when the customers come, they will drive your company forward by paying off any debt you might have incurred and feeding the growth of your startup.