Five ways to finance your new business

Opening your own business is a dream for many Americans. It allows you to be your own boss, pursue a passion and create something you are proud of. However, getting a business started is a lot of work and can be quite expensive. Here are five ways to come up with start-up costs for your business.

Sell pre-orders

Crowdfunding provides many opportunities for small businesses. If you do not have enough money to produce your product line, you could pre-sell your goods on a crowdfunding platform. You could offer a discount for pre-sale orders or some other incentive to customers. Not only will this provide money for your business, it will also help you evaluate the market for your products.

Get a loan from family and friends

Many business owners get help from their friends and family when they start out. Inc. cautions you should only ask for money after you have created a business plan. This will show your loved ones you thought through the process and can give them some idea of when they will be paid back. You should also think about whether it will be a standard loan, or if you want to offer a share of the business.

Build your business slowly

You do not have to start out with branded shopping bags, an expensive website and a full staff. Forbes recommends you should not start out with too many fixed expenses that do not provide a return on investment. Start with a minimum of expenses, and as the business grows, you can spend money on less immediate needs.

Use a credit card

Using a credit card to fund your business can be risky. Do not rack up thousands of dollars of debt that you have no hope of paying off. Use it responsibly and only occasionally. Do not charge more than you will possibly make in sales your first year.

Apply for a loan or microloan

Banks provide loans to some small businesses. You must create a thoroughly researched business plan to get approved for a bank loan. You may also have to put up collateral like your home or other personal assets.

You could also apply for a microloan. A microloan is loan that is between $500 to $35,000 that is given to small business owners. These loans come from microlenders, and there are few hundred operators in the U.S. Microlenders do not require as much documentation as banks, but the interest rates are usually higher.

There are many ways to finance a new business. You may find you use a combination of these methods to get your business off the ground. Before you sign any contracts, you should consider having a business law attorney review the documents to ensure the terms are fair, and you are not putting your personal assets at risk.

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