One of the biggest obstacles that many entrepreneurs face is the lack of funding to get their businesses off the ground. But without the necessary capital, it can be nearly impossible get a business up and running. No matter what niche you may be in, a certain amount of money is necessary to start a business.
The question is where can you get the necessary funds to start your business if you don’t have any? Here are a few financing ideas for small business start-ups.
- Tap into Your 401(k)
Probably one of the most common ways to obtain the financing needed to start a business is to take out a small business loan. While this is certainly a viable option, there are other ways to go about getting your hands on that much-needed money. For one, you might want to tap into the funds you’ve accumulated in your 401(k). If you take the right steps, you can actually withdraw some of that money early without being penalized by the IRS. Before you do, though, you will want to get some advice from an accountant or tax expert to help you navigate this process without getting slapped with financial penalties. Click here if you want more information.
- Consider Crowdfunding
There are crowdfunding sites out there that help make raising money for business startups a cinch. You will set a goal for the amount of money that you would like to accrue over a certain time frame, and family, friends, and even strangers can use the website to pledge their money. A site you might want to consider if you’re thinking about going this route is Kickstarter.com which has helped many entrepreneurs raise the capital they need through crowdfunding to start up their businesses. However, it’s important to keep in mind that this is only a short-term strategy and is not designed for long-term financial requirements.
- Try Factoring
Factoring is a method of financing that involves companies selling their receivables at a discount in exchange for receiving money up-front. It is often used by companies that do not have great credit or by businesses that must fill orders long before they ever get paid. That said, it can be an expensive way to raise money. Companies that sell receivables typically pay a fee that is equal to a percentage of the entire amount. The main reason why companies opt for factoring is that they want to get the cash quickly on their receivables, instead of waiting 30 to 60 days that it can often take customers to pay off their invoices.
As you can see, there are many other ways aside from getting a business loan to get your hands on the funds needed to get your business off the ground.