Finding Finance
Our focus is on building businesses that will provide a healthy 2nd income to allow for long term savings, retirement planning or to help pay off outstanding debts. Thus the sources of finance discussed below assume that you will be looking to build a small business, with minimal start up costs and low running costs.
Savings
A simple assessment of expected sales V expected costs should give you a good feel for whether you are prepared to risk your own money. Note that using your savings is a great motivator for pushing the extra mile when things look bleak; no-one wants to lose the money that took so long to save up. Many professional investors will first look at the size of the owner's stake before even considering the numbers.
Personal Loan
Most people can qualify for small loans of $500+ even on low incomes. By committing to repay a regular amount each month there is a stronger need to succeed, Failure would mean paying off a loan with nothing to show for it. Remember you are more likely to get a loan if you are already employed and plan to start the business in your spare time.
Lending rules will vary from country to country. Be careful not to borrow more than you can afford, and if you already have a debt problem do not go down this route.
Credit Cards
A lot of small businesses have been started with Credit Card finance. The credit line already exists, your stock can be purchased using the card and you can take cash withdrawals if necessary.
We do not ever recommend this as a primary source of finance. It is easy to leave the balance revolving and pay too much interest unless you are very disciplined.
Mortgage/2nd Mortgage
Borrowing against your home is a big step; you put your family at risk of becoming homeless if you cannot make the repayments. But a mortgage is a useful tool for raising larger sums of money, or when you are unable to secure an unsecured loan. The motivation to repay should be strong as you are risking your home, which should ensure your commitment to the fledgling business.
Family/Friends/Colleagues
I can assure you this is not a comfortable choice. Whilst our loved ones and friends may trust our instincts and care deeply about our success, actually asking for the money can be a humbling experience. In my case I had talked about a business opportunity throughout the business planning stage and a number of people had said they would be interested in investing. Once the business plan was complete, I did in fact mange to raise enough money from my friends and family, but in the mean time about 50% of those I asked had backed out.
Angel Investors
There are clubs, societies and individuals scattered around the globe that thrive on putting money into fledgling businesses in return for a share of the business. These investors will also often bring specific expertise such as engineering, financial, or marketing advice. If you cannot find such a group in your local market by searching on the internet then a cheap advert in the local paper might help.
Note if you are looking for investors, you will need to show a business
plan which demonstrates the business idea, expected returns and what share
of the business you will give the Investor. This takes some practice so don't
be surprised if you are unsuccessful the first few times. Ask for feedback
every time and improve your plan as you go along. There are tools on this
site that will help you.