Funding | The Biz Knows

Funding

Regardless of the type of business, funding is a must. Some businesses have minimal start-up cost, while others require more than owners have at their immediate disposal. Either way, there are multiple options for accessing capital to start a new business. One of the first things to consider is how much you’ll need and determine how long it will take for the start-up company to achieve profitability.

Self-Funding

The easiest way to fund a business is with personal savings. If the owner has sufficient means, it’s just a matter of accessing the funds. It may be possible to simply withdrawal money from a checking or savings account or even charge expenses to credit cards. Additional options include liquidating mutual funds or other investment assets, borrowing from retirements plans, obtaining a home equity loan, etc. The caveat to this approach is that the owner is drawing from sources that would otherwise be available for a personal emergency or retirement. So they should consider if there is adequate cash to fund the business as well as retain a rainy day fund for personal usage. If not, the owner should think about if they are willing to lose everything for the sake of the business. No one goes into business with the expectation of failure, but it’s a realistic risk that must be considered when exhausting personal funds. Also, most businesses take a loss or break even during the first one to two years. It’s advised to ensure sufficient capital to sustain the business for at least the first two years. If that’s not possible through personal savings, owners should pursue another options.

Donations

On occasion family members and/or close friends may donate funds to assist with initial cost of funding a new business. Sometimes it’s a show of support without expecting repayment. There may also be local, state or federal economic development funds available for small business development. Occasionally, communities put aside funds specifically for the purpose of developing new business. Chambers of Commerce are good resources to find out if a community has such a program.

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