Starting A Business Without A Loan
Starting a business is one of the most rewarding things a person can do in their lifetime. However, in order to do so, you need two important things: 1) a profitable business concept and 2) enough funding to get it off the ground.
The latter is particularly challenging for many, as most people don’t have enough personal money they can risk losing while securing the requisite financing from a bank can be hard to come by.
Needless to say, you’ll want to be as prepared as you can possibly be in order to make the best use of your time, money, and effort when starting up a new business. Here are a few ways you can increase your odds of a successful venture without needing to take out any loans.
1) Keep another job
Without a loan from a bank or venture capitalist, your funding will have to come from your own income and savings. Hanging on to your present employment will minimize the inevitable stress that comes with launching a new business and expecting it to immediately provide and maintain a steady flow of income from day 1.
It’s far better to start on a smaller level and work on your new business on a part-time basis at first. Once your business becomes reliably profitable and/or demands more time than you can spare while maintaining a job on the side, you can quit working for somebody else and start devoting yourself full-time to the project — but only then.
Beyond a decent income, a good job should provide insurance, a 401K plan, paid vacation and other perks you won’t automatically get from self-employment. Having a stable job will likely be a huge positive throughout the initial period of time you’ll need to grow your business into a sustainable, profitable venture.
2) Use any and all profits for further business growth
Because capital will be scarce, reinvesting the profits from your business back into growing it will be essential to its success. The idea is to witness an exponential growth of your key performance indicators, like revenue, for example.
Over time, the gains from your investment will compound. While this strategy may not feel rewarding in the short term, it will get you to the point where you can live entirely off the income your business provides much sooner.
3) Keep your initial investment & costs low
Keeping your initial level of investment at a bare minimum is another way to reduce your financial risk while learning more about your investment requirements and growth constraints.
Doing so will help you learn to keep your expenses as low as possible in general, subsequently making your business more profitable. Another perk of this strategy is that you’ll likely avoid more investment mistakes.
For example, were you to you invest all at once you could easily mismanage some of the funds due to lack of experience. But by deliberately keeping your initial costs down, when you are finally ready to invest more, you’ll have identified exactly what your needs are and will get more out of your further investments.
4) Use personal connections for investment
Many business startups rely on funding from family members or close friends. While pursuing this option may be harder for some people to consider than others, arranging for a strict and transparent payback schedule can serve to reduce and/or possibly alleviate any potential tension surrounding the issue.
When seeking an investment from your personal connections, always approach things professionally and provide any figures and projections you can to help them better understand your proposal.
Don’t approach the situation as being any different from applying for a loan from a bank or venture capitalist. This will give your friends or family more confidence and trust in your business, and remember, while they’re definitely helping you out, they’re obviously hoping to see a nice return on their investment as well.
5) Use a crowdfunding website
Many successful businesses have been started through crowdfunding websites like Kickstarter and GoFundMe. If you can market your idea such that it gains interest from website users, many people will be willing to donate to see your idea come to fruition.
To further incentivize people to fund your idea through these sites, you can offer a generous return on investment if your business ends up taking off, essentially offering equity in your company in exchange for an initial investment.
6) Go in with a partner
Having a business partner to work with can help you in many ways. First, you can pool your resources, providing your business access to more startup capital while requiring you to invest less personal money than you might otherwise.
Second, a business partner should help to increase the productivity of your business by doubling your manpower and allocating tasks according to your respective strengths. If you have different skill sets, the right partner can further help the business by covering some of your weaker spots. For example, one partner may be better at data analysis and strategy while the other may have superior networking skills.
Unfortunately for many entrepreneurs, loans can be hard to come by. Still, starting a successful new business can be one of the most rewarding achievements in one’s life. If you still want to pursue this path in the absence of an adequate loan, you’ll have to be prepared in the event your business requires personal investment.
Seeking alternative forms of funding from friends, family members, or a crowdfunding site can be a great idea, as can finding a like-minded business partner.
Keeping another job at first while trying to minimize your exposure to financial risk whenever possible are wise decisions. With all of the aforementioned strategies in mind or in practice, you should be able to increase your likelihood of finding success in the marketplace.
We hope you enjoyed this promoted piece as much as we did!