There’s something exhilarating about being an entrepreneur. It’s exciting going into work each day knowing that you are your own boss and get to make all of the critical business decisions. But before you can build your business from the ground up, you need to secure the necessary funding for your new business.
If this is your first LLC, you likely don’t have a financial history that potential lenders use to make their lending decisions. This means that you may need to get creative with the funding methods you will use. How you fund your business can affect many facets of your business, so it’s essential to understand each of your options so you can find the best method when funding your business.
The way you fund your company may depend on a few different factors, including your business history, future business plans, and whether you want to start a new chapter by taking on business debt. To help you understand each funding method, AA Tax & Accounting Services, LLC has put together a guide to determine which option is the best financial decision for your business.
Bootstrapping
In some scenarios, you may not want to take on outside investments or debt. With bootstrapping, a business owner starts their company with little to no capital, relying solely on the money they can provide to fund the business.
In most cases, bootstrapping results in individuals depleting their savings accounts — personal savings, retirement savings, etc. — to back their venture. Bootstrapping allows you to get into the industry without taking on excessive debt but is only a viable option for those entrepreneurs with the additional cash lying around.
Friends & Family Loans
Like bootstrapping, some entrepreneurs may reach out to friends and family members to loan them the money. In this case, the loans would come from the personal savings of individuals that the entrepreneurs know — which can cause tension if the business were to run into any financial problems down the line.
Home Equity Loan
Depending on the amount of cash you have available, you may opt for a home equity loan that allows you to take out a loan based on the equity you’ve built in your home. With a home equity loan, you can borrow all the equity you have built-in your home up to 80% of the home’s current market valuation.
While this may not provide you with a large amount of capital for your new business venture, it should give you a way to get your business up and running. A home equity loan is one of the most affordable options when sourcing money to fund your new business.
Bank Loans
Depending on how much money you need to get your business off the ground, you may want to consider a bank loan. As long as you have a solid business plan, a strong credit history, and a business that will support the local community, you may qualify for a bank loan.
A bank loan is a great way to secure more significant amounts of funding at one time. When securing a bank loan, it’s essential to consider the monthly payment and determine if you will be able to afford it if your new business doesn’t flourish as planned. Even if your business goes under, you will still be responsible for the loan payment.
Have Questions About Funding Your New Business?
AA Tax & Accounting Services is prepared to give you the answers you need. Our financial planners have the experience in navigating the most effective strategies for funding new business ventures.
The AA Tax & Accounting Services team can help you execute the right financial strategies to get your business up and running. Contact us to schedule an appointment.
