Raising the cash for your small biz
Copyright Roger Pierce. Used with permission.
Financing a new venture is a challenge for any entrepreneur. While some upstart businesses can be launched for just a few hundred dollars, others may cost a fortune. It's important to explore all of your options and to consider 'layering' funds together from different sources to generate the total amount you need.
No matter how much you seek to get your small business up and running, consider these popular options to raise the cash:
- Dip into your personal savings. If you're committed to your new small business, you must show it by bellying up some personal cash. It's helpful to consult with your Financial Adviser to determine how much you can afford to invest, hopefully leaving some money aside for contingencies.
- Money from friends and family. Called 'Love Capital', money from people close to you is often the easiest to secure. Loved ones believe in you and your vision. Avoid awkward moments at future family functions by clearly outlining the loan or investment deal in writing.
- Apply for a bank loan. Commercial banks will check your credit rating and review your Business Plan, so don't show up unprepared. They also want to see some investment of personal cash. Other than the big banks, financing may also be obtained from the Business Development Bank of Canada and most Community Credit Unions.
- Secure advance sales. Entrepreneurs with great sales skills can pre-sell customers and use a payment or advance to get their new business going.
- Outside investor or partner. Equity financing means relinquishing some ownership in your new company. Try to retain majority control and be sure to clearly define the roles of any investor. A silent partner who has the cash but doesn't want any day-to-day involvement in your business is ideal.
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