Startups are costly, regardless of what industry you’re in. Many business experts believe that the startup process is the most expensive time in the lifeline of businesses. It’s estimated that the annual cost of a startup is $184,000. That’s money that most Americans don’t have in their bank account. Thankfully, there are many ways you can work around this hurdle. Various businessmen have found different financial pathways to start their businesses. Here are some simple ways you can finance your startup this year.
Liquidation of Assets
This is the most common way businessmen finance their startups. The liquidation of assets is a process of turning properties you own into cash on hand. Having cash on hand is essential for every startup because, without it, businesses would be forced to close if they run out of money. So how do you exactly do this?
Veterans in the business world usually liquidate the assets of a previous business they owned or liquidate their shares if they were a corporation. Those new to business usually liquidate personal assets, such as land, properties, vehicles, and more. Some business owners typically have some sort of inheritance, which they use liquidated to finance their business. Consider which assets you can liquidate to start your business.
Commercial Loans
Another common way you can finance your startup is through loans. One of the most common loans you can get is a commercial loan, which can be borrowed from many lenders all over the United States. But if it’s your first time, it’s recommended that you apply for an SBA loan instead. SBA loans are suitable for small business owners because they have little interest compared with other lending types. Although they might be similar to other offers in the market, it’s an excellent place to start. If you need more money than what the SBA can offer you, then consider getting a commercial loan on top of it.
Business Credit Cards
Business credit cards can help your company during the purchasing of assets. You can use it to buy the necessary assets and products to start your business. Many business owners think of business credit cards as something similar to commercial loans. Although it is undoubtedly true that you are still borrowing money from lenders, business credit cards give you a unique way to pay off your debts. Unlike commercial loans, you only have to pay for what you buy. If you want to take a more hands-on approach to your credit, this is the right financing option for you.
Refinancing
Refinancing is a method used by many business owners who have previous loans or mortgages to pay. The process of refinancing is to revise and replace a previous loan agreement to make it more favorable toward the borrower. During this process, you usually get a new loan, which you can then use to start your business. This is called a cash-out refinancing. This is good if you’re only looking to dip your toes into a particular business model and don’t want to risk your assets entirely.
Investors
Finding the right investors for your startup business can quickly propel your business to success. Investors provide the funds and knowledge you need to start your business. A hands-on investor can be a blessing in disguise for many new entrepreneurs in the industry. However, they usually seek something more than just a repayment. They might ask to have a stake in the company or a cut of its annual profits. This can be a severe hurdle in the future, especially if they ask for something like 25% of your business. Keep this in mind when looking for investors in your startup.
Crowdfunding
Lastly, we go into crowdfunding. Crowdfunding is one of the newer ways younger entrepreneurs start their businesses. This is practiced mostly in tech companies or the video game industry. Essentially, crowdfunding is an investment consumers make into your company. They do this for varying reasons. First, they get the product first before everyone else. Second, investors are entitled to other benefits you offer during the crowdfunding stage. The last reason is that they can be a part of the development process. This is not as common as other financing methods in this list because it’s risky and requires a lot of investment in marketing. However, it can be successful, and given the growing amount of websites for crowdfunding, you can easily access this financing option safely.
Here are six ways you can finance your startup this year. These methods are straightforward because you can find them through various channels, such as the internet or banks. So, get out there and choose the right financing option for your business. It will be your fuel to growth and success in the future.
