One of the greatest threats young business face is the lack of work capital. Sure, getting enough money to start a business is not that difficult, since there are many means of obtaining such funds. However, you need to keep in mind that from the moment of your launch it may take even two years until your business is profitable. This means that every now and then, you will have to come up with a solution to provide a fresh cash for your business. With this in mind, here are a few tips on getting a work capital injection for your startup.
Get a Partner
While some people would never give up equity in their company, sometimes you will be left with no choice. Now, if asked which one is better, being a sole owner in a company or owning a half, this is a no-brainer. Still, it is always better to own a half of a company than to be forced to close completely.
Nonetheless, the fact that you are desperate doesn’t mean that you shouldn’t be picky. After all, you are looking for someone to share your vision. Therefore, it is vital that you ask several vital questions about your potential business partner. For example, what is their financial situation? What are their previous experiences in that particular industry? Most importantly, you need to figure out what are their long term goals for this partnership? If the differences are too big for you to breach, it is usually better to either look for another partner or for another method of financing.
Dealing with Bad Credit Rating
Everyone makes mistakes, but sometimes these mistakes come to haunt us at the worst possible moment. When you find yourself in financial dire straits, you may fail to follow up with your credit payment, which in turn may result in you developing a bad credit rating. This may prevent you from getting another loan, which can be quite problematic for a startup to deal with.
On the other hand, you are not without options and there are two things you can do in these situations. The first one is boost your credit rating, but this takes time, which in most situations you won’t have. The second one is finding a lender willing to deal with companies without an ideal credit rating. For example, Some credit unions like Bad Credit Loans from Perth are willing to make such deals.
Funding from Your Personal Budget
Another option you have is to finance your business with your personal money. This usually means either getting a personal loan (from a friend or family member), selling an asset (a car or a property) or financing your business with your day-job revenue. Unfortunately, a lot of people tend to quit their job as soon as they start their own business, under the excuse that this is the whole point of starting a company. In practice, however, the last method has proven to be quite faulty. In the end, if things get desperate, you can always dip into your retirement account. Still, if it ever comes to this, it might be smarter to simply cut your losses and put a lock on your business.
It would be pretentious to claim that one of these methods is clearly superior to others since their perks and downsides are mostly situational. This is why, you need to know your business like the palm of your hand and be realistic about long term effects of this capital injection on your business. If you truly believe that this is all that it takes for your business to thrive, then no price is too high to pay. On the other hand, it is never worth risking all you’ve got for a small chance of success. Sometimes, it is better to give up in time, while you still have a fighting chance.
Dan Radak is a marketing professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.