There is nothing more exciting to an entrepreneur than coming up with an amazing business idea and then seeing it come to life. However, just like every other business endeavor, a business idea needs funds in order to do so. Therefore, you need to decide how you are going to finance your business idea.
The problem is that this isn’t so easy. If you don’t have a financial history, banks will most probably turn you down. But, worry not, there is a variety of other options out there for getting a loan and investing it into your business idea. Some are easier and others are harder to qualify for, and in the end, it is up to you to make the decision which one is right for you.
Turn to family and friends
For starters, you can always choose the option to turn to the ones that are the closest to you. When you ask such help from your family or friends, you don’t need to pass any complex screenings or anything. But you do need to show them something. As much as these people might be excited to see you succeed, you need to prove to them that you are capable of it. Have a business plan that is developed enough so that you can truly show what your idea looks like and how you plan to set it in motion.
Be sure to let them know about all risks and contingencies. While this may be one of the easiest ways to get finances for your idea, it is also one of the most problematic ones. If you make a shady deal with people that matter to you, and then everything you’ve invested in falls apart, you will quite probably hinder or even completely ruin your relationships. Even if everything works out as planned, every business faces problems sooner or later. So, make sure that both you and those that have invested in you are prepared for such a turn of events.
Look to the angels
Even though it may sound so to someone who hasn’t heard of this solution, it’s not a joke. There are actually people known as angel investors, who are ex-entrepreneurs and experts who want to finance your business idea because they believe that it’s going to pay off. In order to make them think so, though, you need to pass a screening. It won’t work if you show up with just a neat idea and a bunch of promises about how it’s going to turn out. You need to have a developed business plan.
The fact is that every angel investor is interested in a high ROI. Startups quite often fall apart real soon, which is a great loss for the investor too. So, they won’t show interest in your business idea unless you are able to return at least ten times of how much they have invested in you during the upcoming 5 years. You also must have an exit strategy set up, in case your business effort do crash into flames.
Try peer-to-peer lending
Peer-to-peer services are a pretty accessible choice. They are usually found on websites, which help you match with a lender that is appropriate for you. Peer 2 peer lending is actually one of the most common ways to look for finances.
The reasoning behind this is the fact that such loans commonly come with low rates. Still, it doesn’t mean that you shouldn’t spend some time checking out different lenders in order to be certain that you are making the right choice. The application process is very simple, and in only a matter of days, or maybe weeks, you will find out whether the particular lender has decided to give you a loan.
If viable, go for equipment financing
Depending on the kind of business idea that you’ve got, there is a high chance that it involves equipment (such as computer hardware, vehicles, ovens, and so on) in order to happen. And, of course, it costs a certain amount of money. So, in that case, you should consider equipment financing. Next to the fact that you will get the funds that you need in order to get the equipment that your business idea depends on, there is also the fact that it is generally pretty easy to qualify for such loans.
Logically, every lender has in mind the potential risks that their deal with you comes with. Generally, the case is that they will only choose entrepreneurs who can surely repay how much they owe. However, in this case, we are talking about collateralized loans. This means that, if you fail to repay the debt, the lender can take the equipment that you’ve bought as collateral. Due to the fact that this means that their risks are decreased, it is understandable why they aren’t as picky when it comes to people that they are willing to give a loan to. Basically, your credibility and the history of your business matter to them as much as the cost of the equipment that they have lent you the money to purchase.
Every business idea, no matter how great it may sound in theory, needs a proper funding in order to see the light of day. Getting a loan that you are going to invest into it comes in many forms, and it is up to you to decide which method is the best for you.
While some loans are simpler than others, it is important that you have a business plan prepared, so that you can persuade whoever the investor is that the money that they give you is going to be worth it.