I was having this conversation with a fellow business trainer yesterday. She deals with many business owners, especially those just starting out and those experiencing rapid growth. She had been doing some research and an article she read suggested that one of the main reasons businesses fail is lack of capital. This got me thinking about how people finance their businesses and whether they need a lot of capital to start their own business.
To be honest this really depends. If you’re running a product-based business, you’ll obviously need capital to invest in the product, but if you’re going to start a service-based business, many times you can start your business with little or no investment over time. However, you will need some capital and there are a few options available to you:
Friends and family- Many people turn to family and friends to finance their businesses, especially if the financing required is small. Family and friends will often offer you generous repayment terms on your business loan, but make sure everything is done professionally. You don’t want to ruin relationships with friends and family over a few dollars. Also, if you get money from family and friends, be sure to let them share in your business successes.
Business Credit Cards- Business credit cards are another popular option that people look for when looking to grow their business. Business credit cards can help you with cash flow, and if you choose the right card, you can enroll in a rewards program and earn points that can be redeemed for flights, accommodations, or a variety of other rewards that you may find useful. These rewards can be a nice little bonus for all your hard work.
investors- If your business idea is innovative, or if your business plan is solid, you may be able to pitch it to investors and gain some investment in your company. If you expect rapid growth or have an innovative product, then this may be the option for you. The problem with investors is that you can lose some of your decision-making power by giving part of your business to an investor.
At the end of the day, the most important factors for business success are clearly defined goals, the dedication to achieve them, and then a marketing plan that will get your business in front of people. If you need business financing, there are options available to you. I have outlined three of these above.
