You’d be surprised to find how many successful businesses have started at home. For the stage when you lay the foundation of the company, it’s best to run it from home because it allows you to operate it with a limited budget. The first year is the one that comes with the most challenges; you try to attract clients, look for investors, and customise your products to meet the buyers’ requirements. Census data from a survey from the Survey of Business states that 60% of home-based companies bring less than $25,000 in revenue.
Unfortunately, home-based businesses have few financing options, and most owners don’t have the assets to provide collateral for a loan and get conventional bank financing. So, they must look for creative and unique ways to fund their business ideas.
If you find yourself in this position, read on to discover how to make money for your billion-dollar idea.
Crowdfunding
With the Internet at hand, you can pick one of the many excellent crowdfunding platforms that are popular with investors and business owners. Most entrepreneurs choose Kickstarter because it’s the most recognisable name in the industry, but lately, names like Indiegogo, Fundly, Fundable, and RocketHub are also gaining popularity.
Websites like Indiegogo allow entrepreneurs to start campaigns without end dates. RocketHub, for example, allows them to keep the funds even if they don’t meet their goals.
If you start a family-venture, it’s best to join startup companies because it addresses a public that prefers authentic businesses. Fundly is created for non-profits, so head to the platform if you want to ask people to join a cause you support.
In the end, with crowdfunding, it’s best to pick a platform that best promotes the type of venture you start.
Angel investors
Angel investors are unique in the funding world because they are always looking for another investment opportunity and business to support. Many of the giant tech names that rule the Internet world right now started as ventures angel investors supported. Yahoo and Google are two of the most famous names that got off the ground with the help of an angel investor.
The basic idea when collaborating with an angel investor is that you must offer them some share of equity in the business. You also have to register the transactions you have with the angel investor, with the local securities and exchange commission.
Venture capitalists
Venture capitalists work similarly to angel investors. They have money they want to invest in upcoming businesses with the potential to grow and produce high income. They support only the entrepreneurs with fantastic business ideas that have the best chances to run companies that provide monetary returns.
When working with venture capitalists, you must offer them a share of equity in exchange for their funds. Also, they involve in the way you run the business. Their only purpose is to make money on their investment, and most times, they think the best way to do it is to control the company.
Look local
If you want to start a small business at home, one that can grow into the future Facebook, check your local small business development centre. Most communities have one. You can also find some support at the university if you’re a student. The centre can connect you with other entrepreneurs who’re working in the same industry or with angel investors who’re looking for businesses to invest in. They can provide you with advice on the type of financing to choose, according to the kind of business you want to run.
Your local chamber of commerce can also offer guidance in terms of what local funding options are available. Large towns usually have organisations and programs that support young entrepreneurs that want to make their local community a better place.
Take an online loan
If you have a full-time job and you can show the lender you’ve started gaining traction and making revenue, they can approve your application to get an online loan. If your business produces income, you can even head to your local bank and get a traditional loan.
When working with an alternative lender like an online platform, check if they’re legitimate. Most times, alternative lenders fall outside the category of traditional financing institutions. Regardless if you choose a bank or an online lender, spend time to investigate their reliability and services, and make sure their conditions fit your business plan.
Speak with other entrepreneurs and seek advice from seasoned business persons because they can point you to different lending sources that worked for them. Make sure that the funding option you pick now doesn’t end your business in the long term. When you take a loan make sure the funds cover all investments your business needs to take off. Alongside manufacturing the products, and promoting your brand, you also need to collaborate with a provider like The Packaging Company to create containers for delivering the merchandise in safety conditions. All these imply costs so make sure to consider them when you apply for a loan.
Bootstrapping
Most home-based entrepreneurs use bootstrapping when they first start their business. This means you scrap together all personal funds you afford to spare and invest them in your business idea. This includes using money from the credit cards, saving accounts, and home equity lines.
When you don’t have a set goal for the money, using them to power your business can provide you with a clean start. In fact, many entrepreneurs continue to bootstrap even after their business took off the ground. This strategy is beneficial because it keeps you away from extensive loans and working with people who want to dictate how to run your business.
But if you’re looking for a way to scale your company fast, it’s best to use another financing solution. Don’t use your savings to fund your venture before answering some questions.
- What happens when your money run out?
- What do you do if you decide you need extra cash?
- Do you afford to use your savings to invest in your business idea?
You’re ready to launch
This is the best time to run a business from home, with the advent of the Internet that allows you to build an audience and market your company with little or no money. Finding funding will be one of the most challenging parts, but it’s also the most rewarding because it will provide you with allies along the way that will support you during difficult times.