How to Successfully Obtain Funding to Launch a New Business

Starting your own business is one of the most rewarding experiences. However, when you decide to go this route, you need funding and might not know where to start to obtain it. These are some of the best options for getting funding for your new business.

Your Own Savings

It’s always satisfying to rely on yourself to provide funding for your new business. If your savings is ample enough, this is a good option. However, it’s best to avoid completely depleting your bank account because you’ll still need enough money to live on for your everyday expenses such as food, rent, clothing, and utilities. If you turn to your personal savings to fund your company, ensure that you have enough cash left over for at least one year. Most new businesses don’t earn a profit until they’ve been open for at least a few months. Once your startup passes the three to six month mark, you should begin seeing profits coming.

Personal Loans

Although it’s often advisable to avoid borrowing money from family members and friends, a personal loan could be an excellent way to fund your new business. Always take care when choosing to get capital this way; it could lead to hard feelings and even damaged relationships. If you turn to family members or friends to extend a loan your way, make sure that a formal contract is drawn up and be clear about the terms and any interest you might have to provide when it comes time to repay.

It’s also better to avoid asking your relatives or friends for cash straight out. Instead, talk to them about your professional plans and seek their advice. If they offer to provide you with a personal loan, you can then decide whether to accept it.

Credit Cards

Personal or business credit cards are another good option when you need funding for your startup. However, it’s not always the best way to go due to potentially high-interest rates. Your monthly balances might also increase dramatically if you use credit cards to fund your business. It could lead to significant debt and cause you more headaches than benefits and threaten your company.

If you decide to fund with a credit card, make sure you choose one with the lowest possible interest rate and good repayment terms.

Bank Loans

A bank loan can be a good option for funding a new business, but there’s a caveat: banks are more willing to extend a loan to new business owners who have excellent credit and a solid business plan. If your credit is not in great shape, you can take steps toward improving your score. Obtain copies of your credit report from the major credit bureaus, Equifax, Experian, and TransUnion, and read through them thoroughly. If you notice any discrepancies, report them so they can be fixed. Use your credit cards responsibly by staying within 30% of your total credit utilization ratio and keeping balances low. Even better, if you’re able to, pay off your balances in full. Over time, these practices can improve your creditworthiness and increase your chances of being approved for a bank loan to fund your business.