How To Fund Your Business

By Author: Carolyn Clayton
Total Articles: 174
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As the saying goes ‘it takes money to make money.' This is especially true when it comes to business funding. Business funding is getting the cash to get your business off the ground, which can often be a challenge. The traditional route for getting business funding is going to your bank. Going to your bank, however won't get you far as banks do not like lending money to start-up businesses who have no history/assets.

There are several ways in which you can fund your business where you become your own bank, giving you total control over your money, the very control you wanted in the first place:

Part time job
Life insurance policy
Family/friends
Credit cards

By taking a part time job you can use the funds from it for your new business whilst still working your normal job and sorting out your new business venture. You have to ask yourself however if this is realistic; if you have the energy to take on a third job. Could you work a 60-80 hour week? You would be risking burn out and would more than likely end up hurting your health and family relationships due to stress.

You ...
... may also be thinking how can a life insurance policy help me while I'm still alive? The answer is simple you can put your life insurance policy to work while your still around as, what most people don't realise is that you can borrow against the cash value of a life insurance policy and pay it back on a flexible rate, which is on your terms.

Bootstrapping is the term given when you start your business with no outside money. The way this works is you use personal savings and adjust your living allowance so that the start-up costs of your new business are taken care of. The advantage of funding your business in this way is that you are completely independent in how you run your business. The disadvantage however is that your business could end up being under funded as there is nothing to support it. Also when people use their own money to fund their business they tend not to write a business plan. Not having this business plan increases the chance of failure due to the fact the business will not be well researched and analysed and there will be fewer opportunities for feedback.

It is highly important that you find the right funding for your business. You must be selective and smart or your dream business could turn into your worst nightmare, you should think about your long term personal business goals and the type of business you're planning.

There two main categories of funding; debt and equity.

Debt Funding
You borrow money and must pay it back with interest within a certain timeframe. Debt funding sources can be from banks, finance companies, credit unions, credit card companies and private corporations.

Equity Funding
You raise start-up finance for your business by selling a portion of ownership in your company. Selling equity means taking on investors, many small businesses raise equity by bringing in investors to make their business succeed and to get a return on investment. The two main types of equity funding are business angels and venture capitalists.