Being self-employed is a pleasant thought when you consider the different perks associated with running your own business, such as setting your own working hours and being able to work in your pajamas. Unfortunately, the practical application of starting a business is far less "roses and daisies" than the hypothetical one. The first step to creating a strong and successful company is to have a large amount of capital raised through real assets as a base for construction. This article will provide information regarding the different methods that can be used to raise the much needed start-up capital.
1. Personal Investment
It is a rare situation where the owner of a company will use personal financial backing as capital, but personal investment is an option for raising start-up capital if needs be. The amount required is completely dependent on the size of the business; therefore, many people may be able to provide a personal investment as a start-up capital option, but it can be a risky decision and should be carefully considered. If personal backing is used and the company folds, you will stand to lose both the business assets and your personal savings leaving you in financial ruin.
2. Friends And Family
A second technique that is available but not always considered is the option of asking friends and family for start-up investments. While the presentation of a business proposition may be professional, the personal relationship can result in feelings of awkwardness and discomfort. In many situations, friends and family will be willing to support the endeavor without feeling that you are begging for money; however, there is always the chance of being viewed in a less than favorable light.
3. Banks And Peer-To-Peer Lenders
The traditional technique for obtaining start-up capital is to contact a bank for a business loan. This is particularly effective and beneficial for small business owners looking for small business loans as these loans often have positive interest rates. Of course, the chance of receiving a bank loan depends entirely on your current credit rating and the collateral you are able to offer. This is the reason why you must have a strong business plan available with a persuasive presentation.
If the bank is unwilling to offer a loan, there is always the option of peer-to-peer third-party lenders. The amount you are able to obtain will also depend on your credit rating; however, there is little chance you will not receive a loan from these agencies. This is not the ideal option when searching for start-up capital as the repayment rate is typically very high.