Top Four Ways to Fund Your New Business

Starting a new business is both exciting and daring. You are going off on your own and trying to make your dreams come true and become profitable at the same time. The biggest hitch to pulling off this dream, however, is going to be funding. By pulling in this funding from several sources, you can minimize your debt and have all you need to bring your new business to life. Here are four of the most common ways you can get started.

Self-Funding

Self-funding is one of the most obvious ways forward when it comes to funding. Though very few will likely have the capital to fund their entire project, putting your own savings upfront can help you reduce the total amount you need to borrow.

Pros  

It is your money, meaning you do not have to worry about repayments. You can also reduce the total amount you need to borrow, and thus lower your repayments.

Cons

Not everyone has the savings, and if they do, it is not wise to put all your savings on the line. Keep some for emergencies and to keep you and your family financially secure.

Through a Personal Loan

Personal loans are great for those who need the money but don’t want to be indebted to investors. You can get them through a bank, or you can get a Peerform peer to peer loan instead.

Pros

Peer-to-peer loans are ideal for those who want to consolidate their loans or enjoy a fixed APR rate. It means you can not only get the money that you need, but you can simplify the repayment process and enjoy more steady repayments.

Cons

If you already have a lot of debt or bad credit, then your repayments can be quite high. This can put a strain on any new business. In this case, it is often wise to build up credit or to pay off a few loans first before you start your own company.

Through a Crowd-Funding Campaign

Your friends and family can invest in your company with either no intention to be repaid or to be repaid without any interest. Alternatively, you can try your luck at sourcing money from crowd-funding websites.

Pros

Allows you to obtain the funding without either needing to repay it or without interest.

Cons

It is not a guarantee. With crowd-funding websites in particular, if you do not reach your goal, you do not get any of the funding put forward.

Through an Angel Investor or Venture Capitalist

Angel investors and venture capitalists are two sides of the same coin. Angel investors often lend you money either with the intention of being repaid, or not. Venture capitalists invest in your company in the exchange of a percentage of the said company, meaning you not only owe them a repayment, but also a percentage of profits.

Pros

Is often necessary for ambitious companies that need a lot of up-front capital to create the product or service.

Cons

Angel investors are rare, and venture capitalists often come with a long-term commitment and reduction in profits or control.

Funding will always be the biggest hurdle to overcome when you want to start a new business. You need to know your options and even consider using one or more of the choices available to you so that you can minimize your debt and make it easier to pay off.

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