Starting a business whether a side hustle or as your main source of income is a difficult but highly rewarding journey. In order to get funding, you need to first an approximation of how much your business idea will cost you to turn into a reality. Once you have come up with a figure you will have to secure the funds and this is an important step since it can directly affect the structure of your new business. Below are some ways you can secure the funding for your side business.
Self-funding
This is perhaps the most common form of funding for new entrepreneurs who wish to maintain full control of their new side business. The capital can come from one’s savings account, borrowing money from close friends and family. As much as this method allows the business owner complete control over the business structure, it also exposes them to greater risks of losing it all if the side business goes down. On top of that the size of the startup will be limited to the amount the entrepreneur has saved up.
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Venture capitalism
This is a great funding solution for side businesses that have a great potential for rapid growth. It is easy to gain funding this way if you pitch your business in a convincing way to your potential investors. This is a great solution for those that wish to avoid taking up loans. However, you should be willing to give up either a portion of your share, some decision-making power as most venture capitalist require to get a board seat or both. If giving up a portion of your new side business is not a deal breaker, then you should consider this option since you will be able to raise the entire capital easily.
Crowd funding
Crowd funding is also a great low risk fund raising option for your side business. With crowd funding, you will be able to raise the capital you need and also retain control over your side business. This is due to the fact that majority of the crowd funders view the money they give as a gift and mostly the business owner is not obligated to pay it back. They may require a small kickback like getting a sample of the product or being recognized for their contribution. Various crowd sourcing platforms exist and each have their own set of rules that you should go through.
Business loan
For this option, you will need to carry out your due diligence on order to secure a loan for your startup side business. You will need to come up with a detailed business plan, you need to have projections for your side business and a startup expense sheet. These documents will not only help you in selling your business idea to the financial institutions, but will also enable you understand your business model and anticipate common huddles business owners in your industry face. Business loans also enable you to maintain full control over your side business which is always a plus.
Related article: How to get a $25K business loan
Conclusion
In conclusion, we have discussed the importance of choosing the right funding method for your side business by considering factors like whether or not you wish to give up part of your stake in the side business and also how much you need to raise. We have also seen the importance of having documents like a business plan, startup expense sheet and a projection for your business.
Click to download start up expense sheet