There are instances where we simply need to get money for our business in order to get it started, or to take it to the next level. It doesn’t take being an expert business coach to know that it takes money and time to get a business off the ground or expand. The more the money, the further and faster you can expand. Many businesses need assets, equipment, R&D, a website, marketing, staff wages … well you know what I mean, the list is endless.
Get Money for Your Business
This is the most common method; to simply fund it yourself or through your business, often called bootstrapping. You may use savings or actually using the income from your business and reinvesting it back into your business to take it to the next level. The definite advantage of this method is that you have no debt or obligations to anyone else.
2. Use your Day Job
This has its pros and cons. Often, businesses started as a ‘side hustle’ take forever to take off, because the person is caught up in their day job. But the advantage of it is that you have a steady income, which you can put aside a percentage to use in the new business. Keeping a day job going and keeping on top of a new business takes great time management skills (something I teach a lot of) as well as planning and discipline. The other thing is that some employers will allow you to cut back and revert to part-time, so you ultimately get to work more days in your business venture.
3. Borrow from a Bank
This can be in the form of a business bank loan. Here, I recommend you reach out to a very experienced finance broker as banks generally don’t as readily give money for a business as they do say for a house. Banks are often very conservative and careful. Also, usually, the interest rate is higher than a home loan, so you need to factor in these extra costs into your annual business budget.
4. Credit Cards
Many a business owner uses personal credit cards to pay for business expenses and fund purchases; sometimes the purchase of a new vehicle, or perhaps just the day-to-day costs of the business, such as paying the phone bill or supplier invoices on their credit card. Remember that credit cards are expensive in terms of interest rates and you want to ensure you don’t start falling into a hole.
5. Debtor Finance
This is a little different from borrowing money from a bank. There are a few different debtor finance companies and how they operate, but in simple terms, the finance company funds usually about 80% of your invoices. You invoice your clients, send the invoice to the debtor finance company, they pay you 80% and chase the money from your customers. Sounds good? The T&Cs and interest rates are high and I’ve known a few businesses you just can’t get back out from this method of finance. My biggest question is this; why go debtor finance when you can improve your own trading terms with customers, and have great debt collection processes in place? Absolutely be sure to read and understand the fine print!
6. Use an Inheritance
Personally, I’m not a fan of this or using your home as collateral for getting money to run your business. Whilst I’m not a financial advisor, I do know that business has risk and if you use your home or an inheritance to fund your business, what happens if you don’t succeed? The stats are not in your favour, and perhaps I’m conservative, but I personally would not put the roof over my head at risk.
7. Access a Grant
Particularly over COVID, there were a few business grants released. There are literally billions of dollars available every year, through government and corporates. However, don’t get excited! Most of this money is for community, not-for-profit organisations, charities, sporting clubs and minority groups (such as indigenous people). Funds for business are less available and often are for a specific purpose (perhaps to increase employment) and definitely have conditions and criteria. You may be asked to co-contribute a portion. With the larger grants, I highly recommend you access a grant writer to assist you. It’s never as simple as just answering a few questions and they will just hand over the money!
8. Family & Friends
If you’ve got a great idea, then potential family or friends will be willing to come in as an investor or lend (or give) you some cash. Be really clear about what the loan is; or if it is actually a gift. If a loan, ascertain when it’s expected to be repaid, any interest rate and any other expectations. Personally, I would clarify this in writing, especially with an aged parent. What happens if they pass and your relatives or siblings demand instant repayment, which wasn’t the intent of the giver?
Concepts like Shark Tank are great for TV entertainment, but incredibly hard to get onto. Having said that, I did have a client who achieved some money through this means, but this business owner had a very unique and heart-strings based concept; it worked well in that case.
10. Incubator Programs
These are more common in America, but we do have a few options in Australia. They can offer a range of services including internet services, help with presentations, guidance around marketing and other skill-derived services. This method tends to be more on services and education, rather than actual money.
11. Venture Capitalists & Angel Investors
There are absolutely wealthy individuals and angel investor groups who are regularly looking to invest funds into great ideas. Before you approach someone or a group, be prepared. You cannot simply front up, with your hand out and say “Please sir, can I have some money?” Investors have money in the first place because they are savvy and wise with their money. They will want you to demonstrate the idea is great, you’re prepared, have the skills and resources to bring it to fruition and will want something in return, which is usually a share of the company. Preparation is paramount and that is one aspect I do as an experienced business coach and someone who has previously belonged to an Investment Angel group.
This is where you can get money, often a small amount per person, but from a larger group. It’s usually used for a once-off project or concept or product. This is often done through sites like GoFundMe, Pozible, MyCause, Equitise, Birchal or Ezy Raise, to name a few. There are 4 types of crowdfunding:
- Donation-based – they will just give you the money; no strings attached
- Equity funding – the funding persons get a share of the pie
- Debt-based – funds are repaid with interest
- Reward-based – getting tokens, products or services.
With crowdfunding, you need to have a concept which will appeal to people. You might fund a cause that people are passionate about, or something which will be a great advancement for perhaps the community, environment or which sounds really cool to the average person. It’s out there and public but can be quite effective.