Although the amount of capital you need to start a business varies, some small businesses can get up and running for as little as $3,000.
Regardless of how much you need to fund your idea, that money needs to come from somewhere. In order to succeed, you need to take the right steps to gather funding.
Here’s what you need to do to acquire capital for a small business.
Determine How Much You Need
The first step is to get an idea of how much startup funding you need. Microbusinesses can run as little as $3,000, while home-based businesses might need around $2,000 to $5,000 or so.
A good rule of thumb is to have six months of fixed costs to pay for expenses.
Write a Business Plan
If you want to succeed and you need small business capital, you need to have a business plan. A business plan details your goals and how you plan to reach those objectives.
You’ll need a solid business plan if you hope to attract investments. It’s also used to get funding from lenders and financial institutions.
Having a business plan also keeps you on track, making it less likely you’ll run out of money. Make sure to include an executive summary, information on your products and services, details about your marketing strategy, and your budget.
If you’re really tight on funds, you might have to launch your business by bootstrapping. Self-funding or bootstrapping means you only use your own financial resources to get your business idea up and running.
You can self-fund in several ways, such as asking friends and family for help, using your savings, or taking out money from your 401(k).
One of the benefits of this method is that you have more control. The downside is that you shoulder all of the risks.
Venture Capital for a Small Business
An investor might lend you money to launch a business in exchange for venture capital investments. For instance, they might receive an ownership share or play an important role within the company.
The downside is that you have to give up complete ownership and control when you go this route.
Small Business Loans
Small business loans come from banks or government agencies. This popular option is a great way to launch a startup company.
Small business loans allow you to maintain control over your company. However, you need to ensure you’re a good candidate for one.
To improve your chances of getting funding for a small business, make sure you have a solid business plan, good credit, a list of expenses, and a financial plan/projections.
Reach out to credit unions or banks to request the loan. Make sure to compare offers and utilize small business resources to make the best choice.
The Basics of Small Business Funding
These are only a few of your options, but they are some of the most common steps that small business owners take to launch their company. Use them to acquire capital for a small business and make your idea a reality.
For more tips on business and finance, be sure to read some of our other content. We can help your business succeed.