One of the main reasons why more people don’t set up in business by themselves is a lack of much-needed starting capital, and sometimes a total inability to raise any.
Just how much starting capital you will need depends hugely upon the nature of the business that you are launching. If you are going to be a writer then at best you might only need to invest in a pen. But if you are making machine parts or importing electrical equipment which you intend to sell on then your start-up needs are likely to be substantial. For those who are likely to need a helping hand, here is a simple four-step approach.
Step One: Assess What You Already Have
There is no cheaper way to fund your new business venture than by using what you already have. Even if you cannot cover the whole cost of the project, put in whatever you can. Every dollar of your own money that you invest is a dollar you won’t have to borrow at interest. Empty your pockets and throw every last cent that you can spare at your business, you’ll be amazed at how much you can save in credit costs.
Step Two: Ask Friends and Family
You can offer a share in your new business in exchange for an injection of cash, or else you can rely on the goodwill of loved ones to simply offer you a helping hand, either as a gift or as a low or no-interest loan. Don’t be proud, saving on interest payments could make the difference between success and failure in business when the margins are fine.
Step Three: Work out What You Will Need
It makes no sense at all to seek out interest-bearing credit which you could end up not needing. Do the math first to find exactly what you’ll require. Then source as much of it as you can through the above means and borrow only however much additional cash you need once those sources have been exhausted.
Step Four: Seek Grants and Loans
Only at the fourth and final stage should you contemplate borrowing cash from an outside agency. When you must, look first for grants or business loans at a preferred rate, and only once that channel has been thoroughly exhausted should you apply for a small business loan. Even then you should always take care to find the best rate as repayments may vary considerably. Either way, don’t spend any more of your early profits on interest payments than you really do need to.
The Object of the Exercise Is to Maximize Revenue and Minimize Costs
The imperative when setting up in small business is always to keep the costs down as much as you are able. You will want the profits to start rolling it quickly so don’t commit recklessly to interest repayments which will eat into them. The sooner your balance sheet is operating in the black the quicker your business will get off the ground.