Part 14 ~ Acey Gaspard’s Guide to Starting a Small Business – Made Simple
Your business needs funds for the startup phase, and you need cash to stay in operation. The beginning is usually the most crucial time for cash. The longer your business survives in the early stages, the more your chance of success.
It’s a fact that most small businesses fail because they run out of money before they attain profitability. Make sure you get enough startup capital to keep you going until your business is profitable.
Here Are a Few Ideas You Can Use to Raise the Cash You Need During the Early Days of Your Business
If you have a good relationship with your banker, it’s easier to get a loan. A banker who knows and trusts you can make the loan process a lot smoother than a banker who doesn’t.
I’m not saying that if you have a good relationship with your banker, he’ll automatically approve your loan, but if your business plan looks good, your banker can cut through a lot of red tape. Also, keep in mind that a personal guarantee backed up by collateral is most likely needed at this stage because your business is unstable from the bank’s point of view.
Credit cards are a method sometimes overlooked for short-term loans. The interest is usually higher, and for this reason, they should be only used for a short period of time.
If your credit card has not reached its limit, you may want to ask for a credit increase. If your card is close to the limit, try and pay off most of it through a short term loan, and then apply for a credit increase.
You can raise money by getting partners for your business. You don’t have to give away your business because you’re taking on new partners. You could look for a “silent partner,” who supplies funding and makes money from the profits but has no authority.
Another idea is offering a partnership for a limited time.
Family and Friends
You can get a loan from family or friends to help you get started but if you do, then I suggest that you make sure you know when and how you’re going to pay it back and have a backup plan in place in case you can’t pay back the loan.
Use caution when dealing with family and friends, because you could destroy a good relationship over money.
Assets that are not being used, not appreciating, or being saved for a rainy day can be converted into cash that can be used more wisely.
You have to weigh the pros and cons. You can also use assets as collateral for a loan. There are many ways to raise money. Try our brainstorming exercise for ways to raise money for your business.