If you’ve launched an online business and you’re passionate about your service or product, but need cash flow, here are some ways to finance your startup:
1. Crowdfunding
Crowdfunding isn’t just one online platform. It comes in many forms, and you might consider using a crowdfunding platform if you need a significant financial boost to kick off your business venture. If your business sells a product, then reward crowdfunding can be a great way to thank investors. Debt crowdfunding is more like peer to peer investing, which means you will pay back your investors within a specified period. There is also the traditional donation type of crowdfunding. This is where friends and family donate a financial contribution because they believe in your business potential.
2. Attract Angel Investors
If your business needs its first big cash flow to get off the ground, this can be an efficient way to get the money you need. But you’ll need to be prepared to make an in-depth business pitch to this experienced investor. He or she will expect you to provide projections, market research, and all the savvy information about your business idea that you can muster. If you are fortunate to get an angel investor, then they’ll also become your business mentor. This can really be beneficial as you venture out into business on your own.
3. Express Invoice Financing
Late paying of invoices is a major issue in the business to the business world. Even if a company is performing well, late payments from customers or clients can interrupt cash flow and cause bumps in the road for the business. With express invoice financing, a lender gives you an advance on your pending invoices, minus a small percentage fee. When the client pays you back, you pay back the lender. It’s rather simple, and companies like FundThrough task their best employees to make sure your business cash flow isn’t interrupted or stalled.
4. A Short-Term Traditional Loan
One way to finance your online business is through a conventional short-term loan. Does your company have enough profitability to afford monthly payments? Obviously, the last thing you want to have happened is for your loan to go into default because you couldn’t pay your monthly fees. There is variability, but for the most part, short-term loans need to be repaid within a year. That means you must have the profits to pay it back. There will be terms and conditions for your loan, which can make your interest rates fixed or varied. Minimize your potential stress by knowing exactly how much you can afford to pay back (plus interest) each month.
5. Long-Term Loan
An institutional lender like a local or national bank will want a robust record of your business’s success if you seek a long-term loan. That’s because they need to know that your business has the revenue to pay back an amount with interest over five, ten, or even twenty years. Without that substantial evidence of sustained profitability, you aren’t likely to get a loan from a bank. All in all, this means you need to be well-qualified for a long-term loan. Most likely, you have a very thorough business plan in place if you’re thinking of taking out a long-term loan. But if you don’t, it is a must-have before signing for a loan. What are your two, six, ten-year profit margins likely to be? How much can you afford personally every month if your business does not make the profit you anticipate? The stress of managing a loan will diminish exponentially if you have a strong plan in place and can foresee your profit margins for years to come.
Conclusion
There are certainly options out there for financing your online business, each one with pros and cons as unique as you and your small business.
