Financing Your Startup Business

startup funding

Every startup business needs some basic equipment to get going, along with some financing. Depending on the kind of business you are thinking of, you can start with a computer, a printer, and internet connection, or you may have to buy expensive equipment. Here are some tips about how to finance your business.

Home-based businesses can start with tiny financing. If you are thinking about starting an e-commerce site, you can use your home computer and a multifunctional printer, which is not very expensive. Office supplies can be bought at dollar stores or discount retailers. But if the business you are looking to start needs an office, furniture, cars, staff or specialized equipment, your money will certainly not be enough, and you will have to get financing from somewhere.

You can ask for a loan from friends. The positive side is probably your friends won’t request a business plan before they give you the money, you will have to pay a smaller interest, and they may even be indulgent if you are late with payment. The downside is that they may feel they own your business to some extent. And if there are any problems giving back the loan, your relationship will be damaged.

If you choose to ask for financing from friends or family, make the deal as formal as possible. Both of you should sign a promissory note with the amount of the loan, the interest to be paid and the repayment schedule. This way each of you knows what you agreed upon, and you can avoid misunderstandings.

If you ask for a loan from a bank, the first thing you need is a business plan. Banks want to make sure you know exactly how to make money from the firm you intend to start, and you will repay the loan. The business plan has to convince the agent that there is the need for the service you are thinking of, you know who your target is, and what is the market share you expect to have.

You can also get financing by selling an ownership interest in your business. The positive side is that you don’t have to make monthly payments as you would have to do if you had a bank loan. But if you sell ownership, the structure of your business will be more complicated. There are lots of different structures available, each having pros and cons. You should consider carefully before you take any decision.