Opening a business isn’t as easy as making a yard sale. There’s a lot to consider, especially if you’re starting it from scratch. What kind of business do you want to get into? What’s the business model? Who’s your market? How about the permits? And the list goes on.
If you’re determined to open up a shop but aren’t confident in doing it all on your own, franchises might be the option for you. Buying franchises like Sparklean Franchise means you have an experienced mentor who can help you with the documents, logistics, and going live.
But, there’s something else you should consider before you even decide to build a startup or buy a franchise. Funds. Here are some ideas for capital sources:
Tap Your Personal Savings
Bootstrapping is one of the most popular sources of funding startups. The investor taps their personal savings when they have a limited budget for the capital. However, in most cases, it’s not a question of “should you use your personal money or not?” Instead, it’s a matter of how much of your savings you are willing to use for your capital.
According to an article in Entrepreneur.com, the rule of thumb is to keep at least $5,000 in your bank. This is because no matter how cutting-edge the business concept is, there is still a risk for losses. Besides, you can use this money as an emergency fund while your business is operating – for unexpected bills or sudden investment opportunities.
Borrow from Your Retirement Plan
Thinking of dipping into your 401(k) plan? People do it all the time to fund their investments. If you’re using it for a franchise opportunity or for building your own company, one option is called the Rollover as Business Startup (ROBS).
ROBS provides those who have at least $50,000 in their retirement plans with a business financing option. It’s not considered a business loan, as you’re basically borrowing from yourself. You also don’t have to worry about interest. However, there is a downside to this. According to the site Fundera, you may lose your retirement savings if the business is not successful.
Sell Your Stocks
Aspiring entrepreneurs have the option to use their illiquid assets to launch their businesses. For instance, you can sell your stock investments. While your stocks may have given you a good percentage of return per annum over the years, your own business may give you an even higher return. If you found a better business opportunity but have no ready cash to fund it, you may consider selling your stocks. You have to take caution when doing so, and time it well. For reference, here are other considerations when you’re thinking of selling your stocks.
Find a Business Partner
If you don’t have enough money or assets to finance an investment opportunity and don’t want to take out a business loan, you can find a business partner, instead. The two of you can split the cost of the capital, run the company hand-in-hand, and enjoy equal amounts of revenue. When looking for a business partner, consider the following:
- They have to be willing to take risks.
- You have to be compatible.
- They have to be passionate and enthusiastic about the business.
- You have to have the same goals.
- They have to be financially stable.
Funding a business doesn’t mean you have to nosedive into a pool of debt. You can tap into your existing money or investments or get help from a potential business partner. If you’re a bit hesitant, you can look at it this way: you’re using your existing resources to build more.