Last updated on July 27th, 2020
Ask any business owner, starting a new business never comes without challenges and troubles. It requires a lot of work and the need for flexibility when things start to go awry, so entrepreneurs learn quickly how to deal with issues from legal to marketing. In this article, we have shared some of the best ways that can help wannabe entrepreneurs to avail the best possible funding option to start their new design business. Have a look.
Being a beginner is a tough ride especially when it comes to starting a new business. However, the most jarring issue for most people at the beginning of this process is money. If you’re trying to start a new design business, you have to be aware of all of the funding options available to you to make your dream of owning your own business come to life. From saving money to financing and crowdsourcing, small business owners can get creative with the options they have at hand.
Review Some Of The Best Ways To Fund Your New Business Below To Get An Idea Of How To Make Your Design Venture As Successful As Possible
Of course, the most obvious way to fund your new business venture is through various forms of self-funding. Being able to put your own money into your business not only makes you attractive to potential investors down the line, but it will also give you a sense of pride in funding your dreams!
“Boot-strapping” is how so many successful businesses start and no one else will believe in your business if you don’t, so let’s review some of the options so you can decide which may be best for you:
Saving is arguably one of the smartest ways to fund your business, but is easier said than done. If you don’t have a disposable income, then it can be hard to find areas in which you can put away money to help fund the dream of owning your own business.
Luckily, when you’re looking to start your business, you will have a lot of time. It takes time to go through the hoops of creating a legitimate business in the eyes of the law and government, which allows you more time to come up with the money as well.
If you’re serious about starting a business you need to save money where you can. Find ways to cut back in your day-to-day life to give yourself the extra money you need to go towards starting your new design business.
ii. Credit Cards and Personal Loans:
Taking out a loan or using a credit card might be best when it comes to funding certain areas of your business. Buying your website domain, building up your physical stock, purchasing applications, and tools that will make your business run more smoothly are all smart ways to use a loan or credit card.
Taking out a personal loan or getting approved for a credit card with a limit of around $5,000 can help you take care of the little things that are necessary for your business. This small sum of money can help you stay on top of the things that may have slipped your mind throughout this process but will add up quickly!
iii. Using Existing Equity:
If you’re a homeowner looking to become a business owner then you may have the potential to borrow against your home equity and fund your start-up. Homeowners gain equity by paying the mortgage monthly, as well as making upgrades around the home. Making upgrades helps you accrue equity because you’re making the house worth more than what you paid for it.
This type of loan is a second mortgage but allows you to take advantage of the equity you already have in your home by providing you with a lump sum of cash you can utilize in whatever way you want. Hint: to start your own business!
iv. Ask Friends and Family
Receiving funding from your friends and family is a very popular way to support your new small business! Simply asking those who love you and believe in you is a sure-fire way to get cashflow for your business right now. Some people would be happy to give you a gift to get your business started while others may be willing to loan you money interest-free.
Either way, you’ll be adding more capital to get things off the ground. Similar to the approach of taking out a personal loan or using a credit card, this money will help you fund things like building your website and getting the tools in place to start running your business.
Asking your friends and family is never an easy feat and should be treated like you’re pitching serious business investors for help. Come prepared with pitch material, like your business plan and a presentation to help them understand why they should give or loan you money. Doing so will help build trust and show them you’re serious about this business venture.
Before you do any of this, remember what will be at risk if you do receive a loan from someone you have a personal relationship with. You must have an understanding of what negative effects this could have on your relationship if for some reason you are unable to pay the loan back. A smart way to ensure you both feel comfortable with this transaction is to create a contract for the loan that defines the repayment schedule and where interest rates or lack thereof are agreed upon.
02. Small Business Loans
With a small business loan, you can likely get approved for a larger amount than you would be compared to a personal loan or credit card. These types of loans help get your business up and running and can cover the cost of essential things you need to establish your new business, like real estate, equipment, and help with operating capital.
Since they are specifically designed for small business owners there are a lot of benefits you can enjoy when you are accepted to receive a small business loan. Because these loans are government-backed by the Small Business Administration, you enjoy rates and fees that are lower compared to a personal loan or another type of non-guaranteed loan from a bank.
Plus, because they’re guaranteed by the SBA, there’s lower down payments and flexible requirements and the SBA will continue to help you throughout the process of beginning to run your business. The government has educational programs and counseling available to new business owners to help keep their venture profitable.
Due to COVID-19, it’s harder than ever to receive a business loan from a bank, but it is still possible. Because of this, you need to be prepared with a strong business plan, profit projections, and what areas of your business you plan to use the loan for. It’s even better if you can show the bank that you’re investing your own money or have money from friends to start up your business as well.
Accessing capital to start your own business takes a lot of time and effort, however, financing is a smart way to do so because you don’t have to give away a piece of your business as you do with investors.
03. Look Into Contests and Grants
Believe it or not, contests and grants to win money for your business venture do exist! These are two ways to win free money to help get your business off the ground. Both contests and grants aren’t as easy to come by as applying for a loan and are dependent upon outside factors, like where you live and if anyone is currently putting on a competition for small business owners.
But let’s look at these two free money options and differentiate between them:
Companies that support small businesses and start-ups often hold contests and competitions for growing companies to win money. The best part is that these are usually interest-free and a gift of money. A lot of contests are usually directed towards a certain niche, such as design businesses, tech start-ups, or contractors, so you have to keep your eyes out for something your new business will qualify for!
Be smart when it comes to applying for a contest and do your research, this is a unique way to raise money for your business, but you have to be smart about it so you aren’t taken advantage of.
Grants are a little more common than contests when it comes to funding a small business. These are monetary gifts usually given by the state or federal government, but private companies that want to see new businesses flourish will offer them from time to time as well.
The main difference between grants and contests is that grants usually have restrictions on where you can spend the money once you receive it. So, when you are applying for grants, be sure you’re applying for one that coincides with what you need money for.
The term “free money” always seems questionable when you’re doing something as serious as starting a business. However, grants and contests are a guaranteed way to get some interest-free capital. Always be sure to do enough research before applying for either of these cash prize opportunities to ensure you’re applying for the proper grant and the contest is legitimate.
Crowdfunding is a shockingly successful way to build the funds for your business; it’s when you search a variety of forums and people to help raise money. Many start-ups and small businesses have raised capital at the beginning of their journey by using sites like Kickstarter or GoFundMe which are types of crowdfunding sources.
The best thing about crowdfunding is that it offers you a variety of options. You can take the root of simply raising small amounts of money from a lot of different people, via a website or word of mouth. It can be fun because it allows you to be a little more creative with your pitch and share more of your personal background story to pull on the general public’s heartstring to get their help.
These people aren’t as invested in the future success of your business. Not to say they won’t support you when it’s off the ground, but right now they just want to see your business up and running so you don’t have to be as professional as you would when looking for investors. However, this is not to say that crowdfunding can’t attract investors, because it can, which is another great outcome of doing it!
If you attract an investor from your crowdfunding efforts, be ready to share even more information about your business plan to keep them on the hook. An investor will give you money for a piece of your business, in hopes that they will receive a profit in turn, so they will want to know more details about your business and projected profits. Investors and venture capitalists will be focused on the future success of your business and how they can make money too.
Chances are, no matter which stage of life your business is in, one of these funding options will be helpful to you at one point or another. Having sufficient finances is necessary to start your dream business and just another hoop that all entrepreneurs have to jump through. Be sure to weigh all of the options from saving money to loans and investing. It is your choice to decide which option will help you be happy and your design business be successful!