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Establishing a business is a great way to turn your passion and hobbies into a profitable endeavour. But before you print your business cards and look for clients, you first need to look for funding.

You can fund a small business in numerous ways, from personal savings to equity finance, bank loans, and alternative business loans. Here is a quick guide on how you can finance the business of your dreams.

Personal Savings

When thinking of starting a business, most people would think they would have to save a lot of money before they begin it. Although this is a viable option for some, many are not as fortunate.

If your dream is to open a restaurant in Sydney, you need at least $650,000 to do it comfortably. This price includes everything, such as leasing the venue, acquiring the equipment, marketing, and overhead expenses.

Yes, the start-up cost depends on the business you want to establish. However, if you rely only on your ability to save, your business idea may be dated, or there will be a million competitors by the time you’re ready to open your doors.

Equity Financing

Equity finance is a funding option that pools your money with other people’s money. However, in exchange for giving your starting capital, you are to offer part ownership of your company to your investors.

When considering equity finance, your primary sources of capital can come from family and friends, business angels, crowdfunding, crowd-sourced funding, venture capitalists, and public floats. Before you start setting up an online crowdfunding campaign, you need to get acquainted with the regulations surrounding it.

Equity finance is a great way to establish a business faster, and without any starting debts. However, keep in mind that it may mean that you will not have full control of your business, and it could change your relationship with family and friends who have invested in your business venture.

Bank Loans

A bank loan is a traditional credit funding option for businesses. It involves approaching the bank and applying for a loan to cover all or part of your start-up costs.

To apply for a business loan through a bank lender, you need to have a clear business vision, understand your finances, prepare your business plan, and prepare the paperwork. The necessary documents depend on the bank. However, most would look for accountant-prepared financial statements, proof of individual income, bank statements, proof of identification, cash flow projections, and a business plan.

Although bank loans are the most common option, getting approval is challenging. They are stricter with the requirements and harsher on the pre-work, making the approval rate slimmer.

Alternative Business Loans

Alternative lenders for small businesses are private companies who, like banks, lend people the money they need. However, these lenders provide more accessible funding options to help companies get off the ground.

There are a multitude of alternative lending options available. Here are some of the options that you can use to start your business:

  • Bridge loans
  • Equipment financing
  • Instalment loans
  • Invoice factoring
  • Lines of credit
  • Merchant cash advances
  • Microloans
  • Short-term loans

Conclusion

There are a lot of hurdles you can expect to face when you start a business. One of the biggest challenges is raising enough money to start on the right track.

You can fund your business in a myriad of ways. You can save up for it, offer part ownership to investors, apply for bank loans, or get alternative business loans. But to choose the best funding option for you, it is important to understand your financial needs, financial capabilities, and the pros and cons of each funding option.

Wealthy You is a company that offers some of the best small business loans in Sydney, NSW. Whether you want to start a café or a clothing company, you can trust that we can find the best financial solution for you. Contact us today and let us bring your business dreams to life!

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