Today, it’s easier than ever to start a business of your own without borrowing any money. Many businesses can easily be run online, meaning that there is no need for you to think about getting the money together to rent an office space or hire employees.
If you’re starting up a service-based business, then you will have even fewer expenses as you won’t need to get inventory or pay for somewhere to store it. However, there is no getting away from some business costs no matter what kind of company you decide to run.
Even setting up and running your website successfully is going to cost you something, and many small business owners will decide to invest in professional advertising and marketing services to spread the word to customers and improve their profitability. If you want to borrow some money to get your small business started, here are some practical tips to keep in mind.
Avoid Bank Loans
It’s getting harder and harder to get a business loan from the bank these days. If you’re just starting out with a new small business, there’s no guarantee you’ll be accepted for a bank loan – in fact, most small business owners are unsuccessful, as they have little to no history to show the bank that they’re going to be a responsible lender or that the business is going to be profitable.
While going to the bank for a loan might sometimes feel like the most obvious route to take when you are starting a small business, the truth is that it’s not always the most effective choice. And, banks tend to only lend large sums of money to businesses, which might not be ideal for you if you only need a small, short-term injection of cash to get your business going.
Consider a Payday or Short-Term Loan
If you are starting your small business while working full-time and have guaranteed income that you can use to pay off the money that you borrow, it might be worth considering getting a short-term or payday loan to use for small business expenses.
Short-term loans can be an ideal option for dealing with short-term financing issues or covering some expenses while getting your business started up. Since you will usually borrow these as a personal rather than a business loan, they are an ideal choice for sole traders, but bear in mind that your personal assets will be impacted if you are unable to make repayments on the loan.
You can find out more about Pay Day Loans and short-term loans at Payday UK. Payday UK is a short-term loan broker offering a range of different financing options that might be suitable for your needs while getting your business started or dealing with temporary cash flow issues.
Get a Business Credit Card
Applying for a business credit card is an ideal way to get access to ongoing funds that you can use for business expenses, along with building your new company’s credit rating. You can find a range of different business credit cards that work in very much the same way as a personal credit card, providing your business with access to ongoing funding that can be repaid and used again.
Business credit cards are often easier to get compared to large business loans. While you may have to start out with a small credit card balance which may be increased as you make repayments on time, it can be an ideal way to get access to additional funding and build your credibility as a business borrower.
Find a Small Business Lender
If you are starting a small business or already own a small business that you want to get additional funding for, finding a dedicated lender that works with small businesses can be the way forward for you.
Small business lenders have the main purpose of working with companies like yours to provide financing and advice. If you’re not in a position to get a bank loan and would prefer to borrow from a business lender rather than using your personal finances to fund your business, this can be an ideal option to consider.
Consider Finding Investors
It’s also worth looking at the alternatives that are available to personal and business loans when it comes to financing your business. Getting investment in your company can take some work and a little bit more time, but it’s worth considering if you have a business idea that you think might take off in the future.
There are several options to consider when it comes to finding investors for your company. Angel investors are often actively looking for businesses that have a lot of potential and will invest money in your company for a share in the business.
Another option to consider is crowdfunding, which allows you to make your potential customers shareholders by asking them to micro-invest in your company. Small investments from lots of interested individuals can quickly add up to provide the funding that you need.
Should You Use a Personal Loan to Fund Your Business?
If you’re just starting out with a home-based business or a small business, it can often be much easier to get started by taking out a personal loan to cover business expenses. There are some occasions where it can be a good idea to use a personal loan to fund your business venture, especially as getting a business loan can be trickier for new, small businesses that do not have any financial or credit history.
While most experts would agree that it’s usually best to keep your personal and business finances separated, this will usually depend on your specific situation and the kind of business that you run.
For example, if you run a small, home-based business where all of the profits are kept by you, it’s your main source of income and you have very few costs to cover, taking out a personal loan for funding is likely to be much less risky compared to a business that hires employees and has a lot of business expenses to pay.
How a Personal Loan Can Help
In some cases, a personal loan can be an easier option for getting access to the funding that you need when starting or growing your small business.
However, it’s worth bearing in mind that since your personal assets will be impacted if your business is unable to bring in enough money to cover the loan repayments, it is usually best to only use personal finance products that are small and short-term to cover business expenses, rather than taking out a large bank loan for example.
Getting a personal loan can be a much easier process compared to taking out a business loan for many reasons, including that it’s your personal financial history rather than the non-existent financial history of your new business that is going to be taken into consideration.
No matter what kind of small business you want to start, getting the funding that you need is often the first obstacle to tackle. While some UK business ideas will need more funding than others, there are various options to consider to help you get the cash injection necessary to start and run a successful business.