If you are an aspiring entrepreneur, you often have great business ideas that you want to pursue, such as a franchise, a new product, or a tech startup. Once you have realised the potential of your idea you start to become excited. You even start imagining how it will take form - the business strategy, operations, marketing, logistics, etc.
But your excitement may die down, as you come to realize the biggest question when starting a business.
"How and where do I find the money to start?"
Money is the life blood of business. If you don't have enough capital, you will have a hard time getting started.
Good thing there are options out there that you can investigate if you are looking for ways to fund your business. As a mentor and business advisor in Auckland, New Zealand, we have suggested some of the various financing options, including the pros and cons of each option to help you.
Option #1 - Personal savings
Self-funding is the most common way to finance a business. Often, entrepreneurs use their hard-earned personal savings to start.
The advantage of personally funding your business is that you have control over your money and the business is yours alone. However, it may take a longer period to save money and launch your dream business.
Option #2 - Friends and family
Asking friends and family to help you fund your business is also a good option to consider. Just make sure that you let them know the risks of where they are putting their money, as well as the terms for how you plan to pay them back..
Even though you share a good relationship with your friends and family, it is still advisable to be professional in dealing with them – especially where money is involved. Set proper expectations and create a clear agreement outlining the arrangements.
Failure to meet expectations can put your relationship with them in jeopardy. Things can get messy and at worst could lead to ruining a friendship or worse broken family relationships.
Option #3 - Partnerships
You can invite someone or a group of people or a company who are willing to partner with you to fund your business. They could be a capitalist or industrial partner, depending on the partnership agreement.
Partnerships are also a good source of funding but you should be aware that profits and risks must be shared among the partners. If you decide to go for partnership, make sure you have a solid partnership contract signed by all the involved parties. This will be your reference in case there is conflict.
Option #4 - Crowdfunding
Crowdfunding has become popular because of the many technological businesses that have sprouted from it today. Entrepreneurs who have web-based projects or ideas often seek this platform to finance their business.
Basically, crowdfunding works when an individual with an idea reaches out to thousands of potential investors using various platforms. There are hundreds of crowdfunding sites and platforms today that you can check out. However, if you are thinking of going with this option, it is advisable to research it well.
Option #5 - Investors
You can also look for an affluent individual who will help you fund the business. There are cash-rich people out there who are willing to invest in certain business ventures. But it is not easy to find one and if you do, you need to prove that your business ideas are in line with their business goals.
Option #6 - Bank loan
This option is also the most common way to finance a business. However, many entrepreneurs are hesitant to go for this option because of the many requirements. Furthermore, it is not certain that your loan will be approved.
A comprehensive business plan and financial projections are often required for you to get a bank loan. As a trusted accounting firm in Auckland, we have assisted many entrepreneurs to obtain bank loans. We have helped them prepare their business plan and their financial forecasts to ensure a successful loan application.
If you are looking for a business advisor or a chartered accountant to assist you in preparing for bank loan requirements, or if you need assistance investigating other options to finance your business, we can help you in the business planning process. Further, as a tax accountant in Auckland, we can also assist you with different accounting services such as preparing tax returns, annual accounts, GST and more. We also use the best accounting software in NZ so you are assured that you get accurate, reliable and timely financial reports.
We invite you to book an appointment online
with us or call us on (09) 576 4166 to talk about your business options.