Lots of people dream about starting their own business. There are currently over 30 million small businesses in the United States alone, with almost 60 million small business employees. It’s worth noting that the number of small business employees is only about twice the number of total small businesses. This means that the majority of these companies are owned and operated by one person.
Whether you want to be your own boss – or eventually flesh out a moderately sized company – there’s one hurdle everyone eventually faces: Money! There are lots of opinions out there about what’s the best way to go about funding your company. It’s never easy to self-finance your company, especially on a tight budget. However, it’s possible to be successful this way if you take a smart approach.
You Probably Don’t Have a Ton of Upfront Capital
Most people don’t have a ton of money sitting around. Even if you do have a bit of upfront capital, it might not be enough to fund your initial business expenses. Borrowing money is going to be a primary financing route for people who find themselves in this situation. But where’s the best place to go for this?
Sometimes banks will lend money to people who want to start a small business; but this isn’t always the case. Often, you’ll have to use some form of leverage on your home in order to secure SMB funding from a large financial institution. But this can be tricky for a few reasons.
First, you’re going to have to make payments every month in order to reduce this debt. This can be hard, if not impossible, when in the early stages of starting a company. You also might be in danger of losing your home if you’re unable to repay the loan. Some people will opt to use credit cards, or withdraw money from their 401(k) plan. These methods can work, but also come with their issues. You’ll have to pay a stiff penalty to take money out of your retirement fund. And while credit cards are great while they’re not charging interest, those rates can skyrocket. If you can’t pay off the debt before then, you’ll end up quickly compounding more and more debt.
Consider Ways You Can Lower Expenses
It’s always a good idea to consider ways you can spend less money. Cutting back on costs will let you pay back your debt more easily. It might even allow you to succeed while borrowing less money.
Here are a couple avenues you can pursue to save money:
- Find the right web host. You won’t be able to afford a fully custom-built website with private servers. Cheap web hosting from Yahoo Small Business is one of the best ways to save money for your SMB. This doesn’t mean you’re going to get some kind of dump site. A lot of budget themes and hosting options are now super professional. So, you can build a solid website even if you don’t have a lot of cash.
- Can you run your business totally online? If you can operate out of your home, you’ll save yourself a lot of money each month in office space and transportation costs. This is a move that might put your SMB on the fast track to profitability.
There Are Benefits to Self-Financing Too
Try not to think of self-financing as all doom and gloom. There are actually some pretty substantial benefits to it as well. The most apparent pro to self-financing is that you maintain control over your organization.
When you source capital in exchange for equity, you’re giving a part of your project to outside players. That means they’re going to want things done a certain way in order to protect their investment. By maintaining control over all financing streams, you won’t have to hand over influence to people who might not ultimately see things the same way as you.
Having a tight budget can be tricky when self-starting your small business. However, you shouldn’t let this deter you if you really believe in yourself and your idea. Despite its challenges, there are ways to find success through self-financing your SMB.