How to Finance a Business for Success

Have you always wanted to start your own business? Good news: Nearly 70 percent of U.S. entrepreneurs start their businesses at home. But where do you begin — and how do you get the money you need?

Learning how to finance a business isn’t simple, but there are many resources to help. Visit the Small Business Administration (SBA) website for useful information on determining how much capital you need, refining your business plan and calculating your startup costs — and read on for an overview of six financing options you’ll want to consider as you turn your business dreams into reality.

Use Your Savings

According to the SBA Office of Advocacy, “The most common source of capital to finance business expansion is personal and family savings.” You can tap into your retirement savings, too, but no matter what savings you use, you’ll want to strategically borrow from your personal reserves.

Open a Business Bank Account

Set up business checking and savings accounts and a credit card. Not only does this step help keep your personal and professional finances separate, it also allows you to use your credit for larger purchases that help get your business off the ground.

Consider Small Business Loans

SBA loan programs offer several options for financing your business. The most common — the SBA 7(a) Loan Program — offers loans up to $5,000,000 with no minimum. There are long-term loans for things like consolidating debt and fixed asset purchases as well as short-term loans for things like inventory and working capital. An SBA Loan Specialist can help you pinpoint which option is right for your situation.

The Small Business Administration also offers resources locally to help new entrepreneurs realize their dream of business ownership and to help existing business owners stay competitive. For example, Small Business Development Centers (SBDCs) offer free one-on-one expert business counseling and low-cost training by qualified small business professionals. There are over 900 local SBDC locations across the country.

Traditional bank business loans, like business equipment and mortgage loans, are available, too. You can even explore whether your business could qualify for a research grant.

Turn to Crowdfunding

Sometimes, the best place to turn is to your network of family and friends. GoFundMe makes it easy to share your story and goals to help you raise money, though the company does take a 5 percent cut from each donation, along with a payment processor fee of 2.9 percent and $0.30 per donation.

Once you’ve tapped your immediate circle, turn to the greater global network: the internet. Crowdfunding site Kickstarter has funded famous products, like the Pebble smartwatch, but it’s limited to creative projects and has similar fees to GoFundMe. For non-product fundraising — like for a local business — turn to Indiegogo. While again there are fees attached, this site can connect you with a network of partner companies that help with marketing, prototyping, retailing and more.

Even if you don’t get funded, these sites offer a way to gain valuable feedback from a larger audience, allowing you to rework your idea and make it more viable.

Find a Co-founder

According to Small Business Trends, having a co-founder can dramatically increase your financing abilities — and your odds of success. But a co-founder does more than help raise more money. Business partnerships are 19 percent less likely to scale prematurely and have almost three times the user growth of solo ventures.

Enter Startup Competitions

Once your business is off the ground, you may find you need more robust financing to grow. No, you don’t have to go on “Shark Tank,” though startup competitions do give you a global platform to sell your idea — and win some cash. But winning isn’t everything. These contests also give you the chance to get your idea into the world and network with other entrepreneurs. Many well-known pitch contests are tech-focused, so make sure to look for ones in your area of focus.

Deciding how to finance your business is as major of a step as deciding to start one in the first place. Be sure to take care in researching your options, since the choices you make now have the power to help — or hurt — your business for years to come.

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