Five tips on how to get money to start a business
Many people dream of working for themselves in the field about which they are most passionate. However, starting your own business is a financial risk that could end up using all of your savings and leaving you in debt if you are unable to find success. Sadly, 90% of startup businesses fail within the first few years of operation. This is enough to make most people think twice about starting a business, but with some careful planning and a financial strategy, you can realize your dreams of operating your own business.
Five tips for getting money to start a business
The first step to opening a business is to fund it. On average, it takes around $11,000 to fund a business. Some businesses, such as writing at home may cost less. Others, such as opening a private medical practice can cost significantly more. Regardless of how much it costs to start your business, you are going to need to get the funds from somewhere.
Here are some tips for how to get enough money to start a business:
- Save — Most startups are funded from the pockets of the owners. However, you should not completely drain your savings to start a business. You will need to set aside money specifically for living expenses because your startup will likely not be profitable at first. If you know you would like to start a business, start setting aside some money for that while also setting aside money for living expenses to ensure you are covered for both when you are ready to get started.
- Find an investor — Anyone with money who is interested in your business can be a potential investor. This might include friends and family members or organizations that specialize in investing in small businesses. Be sure you have a clear business plan with concise terms on what your investors can expect from their investment, such as rate of interest and when to expect it will be repaid.
- Get a business loan — Banks and credit unions offer small business loans for prospective business owners with a clear plan and great credit scores. These loans are not easy to get, but if you can prove your worth to one of these financial institutions, they can be a great source of funds to start your business.
- Crowdfund — Thanks to the internet and social media, a more modern solution for many aspiring startups is to crowdfund. Crowdfunders provide financial support for you to start your business but do not receive part-ownership or a return of interest like investors. Instead, you supply them with a gift in exchange for their level of contribution. For example, if you plan to sell T-shirts, you can offer a standard shirt for low-level funders and offer a custom design for high-level funders.
Crowdfunding can be a great way to start because you maintain full ownership, but you need to make sure you are able to follow through with your promises to your backers. Also, take the time to understand the fine print of the platform you are hosting through. Some require you to meet a certain goal. Some take a larger percentage of the cut from donations. Get to know the advantages of each before selecting the platform you will use.
- Apply for a grant — Some businesses qualify for a federal grant for financial support. Non-profits usually meet the criteria for assistance but some for-profit businesses also qualify for grants. Check with Grants.gov to see if you qualify and learn how to apply.
Finance your small business with the guidance of a ProVise financial advisor
Navigating how to start a business on your own is like going on a road trip without a map or GPS. It is easy to get lost, and you might end up stranded on the side of the road. At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals act as your guides on your road trip to reaching your financial goals.
We take the time to get to know you, your business goals, personal values and risk tolerance to come up with a financial strategy to help get you started. The plans we create are designed for the long-run, with some flexibility for adjustments as your business grows. We also provide plans at a fiduciary standard of care. If for any reason you are unhappy with your written plan, we provide an unconditional money-back guarantee. All you have to do is return it to us and we will refund 100% of the fee paid.
Are you ready to start your journey toward becoming a business owner? Contact ProVise today to schedule a complimentary consultation.