Common Ways Entrepreneurs Can Finance The Start-up of a New Business

Are you an aspiring entrepreneur looking to finance the start-up of a new business? Do you have a business idea in your mind that you want to implement, but you're straining to raise sufficient funds to set up your dream business? If so, you are not alone, as many business aspirants are struggling with the same problem. Nowadays, most financial institutions, such as banks and private lenders, are reluctant to lend money to start-up businesses terming the risk as high. The main concern with most startup businesses is that they close down within 2-3 years after startup making them ineligible for a standard business loan which lasts for a term of five years.

Unwillingness by financial institutions to lend money to startup businesses does not mean that you give up on your dream, as there are many other alternative sources of finance that you can seek to meet your financial goals and set up your dream business. NowLoan has come to the rescue of prospective entrepreneurs as it helps them to analyse and find the best possible lenders at no cost. The objective of NowLoan is to help those seeking any form of finance to find the right lenders who are willing to lend them money irrespective of their credit score. Besides NowLoan, let's look at the common ways aspiring entrepreneurs can finance the start-up of their new businesses.

Personal Investment

To start-up a new business, you need capital in the form of cash or assets. If your cash isn't enough to finance the startup and running of your business, then you can turn to your assets for additional cash. Investors and bankers will be willing to lend you the money you need as long as you pledge your assets as collateral. Furthermore, this will help you to obtain loans at reasonable interest rates because the lenders are undoubtedly of your commitment towards your project.

Friends and Family Members

Seeking financial support from family members and friends is a great way to start a business. Unlike banks and other lenders, convincing your friends and family members about the viability of your business idea is somewhat easier.

They will be willing to sponsor your business idea by providing you with reasonable family and friend loans. However, you should learn to differentiate personal friendship from any form of financial assistance that has to be repaid. Failure to honour the agreement can ruin your relationship with friends and family members, and thus the need to take note of every financial detail no matter how small it is.

Bootstrapping

One of the most typical ways to finance the starting and running of your business is via bootstrapping. It involves the use of your own money to finance your business. These funds can be obtained from your savings, low-interest credit cards, a reverse mortgage on your home, and more. A free credit report card will help you to evaluate your current financial position. Being aware of this will help you to determine the interest rate that will be imposed whenever you borrow loans, and this will help you to access credit at reasonable rates.

Use Credit Cards

Credit cards can provide quick access to cash needed to set up and run a business. However, credit cards attract high-interest rates for any amount that remain unsettled at the end of the month. Based on the 2015 research, the interest rates imposed on unsecured loans for persons with a fair credit score ranges from 12%-22%. 

Credit card loans are not recommended for startup businesses since their repayments are made every month, and a new business may not be in a position to generate enough money to repay. Moreover, any balance that remains unpaid at the end of the month is subject to hefty penalties, making it worse for a startup business to manage debts and its operations. Instead of credit card loans, any aspiring entrepreneur should opt for cards providing rewards or cashback programs in regards to business purchases. To find low-interest credit card loans, use NowLoan website to compare different credit card lenders and their interest rates. This will help you to make a well-informed decision concerning the type of credit card to choose. 

Crowdfunding

The growth of the internet has made it possible for businesses to market and sell products online. However, over the last ten years, the web has turned into a source of financing.

If you have a sexy business idea, you can make use of crowdfunding websites to post online appeals for financial support. You will find many people contributing to finance your business dream.

Aspiring entrepreneurs who seek any form of financial support on a crowdfunding platform need to be conversant with the rules of the game. Note that some crowdfunding platforms only release the collected funds once a specified goal has been set on the record. Failure to meet the goal, the crowdfunding platform is left with no other option other than to return the collected funds to donors.