Starting your own business is an exciting endeavor, but funding it can feel like a major hurdle. While it’s tempting to dive right in, it’s important to be strategic in how you approach business funding. Here are a few tips for launching your business—without putting yourself in financial jeopardy.
Why Borrowing Money is a Bad Idea
The idea of borrowing money to start your business can seem like an easy shortcut, but it comes with a lot of risk. If you decide to take out a business loan, it will be your responsibility to pay it back—even if your business doesn’t succeed. The harsh reality is that many small businesses fail, and you don’t want to be stuck paying off a loan for a company that no longer exists.
Likewise, relying on credit cards is a dangerous move. With average credit card interest rates around 20%, using plastic to fund your business is essentially taking out an extremely expensive loan. Don’t fall into the trap of thinking you can easily repay that money once your business picks up—most new businesses take time to become profitable.
Instead, business grants are a great option because they don’t require repayment. Look into federal, state, and local government grants, especially those tailored to specific types of businesses or entrepreneurs in your community. Be prepared for competition, but apply for grants wherever possible!
Start on the Side: Fund Your Business While Working Your Day Job
If you’re still in the planning stages of your business, it’s a good idea to start small and work alongside your current job. This way, you can keep your personal finances secure while building your business on the side.
A perfect example of this approach is food trucks. Opening a full-scale restaurant is expensive, and the failure rate is high. But with a food truck, your start-up costs are much more manageable. You can work on building your clientele in your spare time, gradually growing your business without risking your financial stability.
It’s not just about food trucks—many businesses can be started with a minimal viable product. Instead of diving into a large, expensive project, start with something simple that gets your name out there and builds interest. If you want to start a restaurant, maybe begin by selling meals from a local kitchen or hosting pop-up events. Slowly build up your brand and funds until you can afford a more permanent space.
Resources and Support for Small Business Owners
Building a business while juggling a day job takes time and commitment. For those of you without the responsibility of raising children, this can be a great advantage—using your Childfree time to focus on entrepreneurship gives you the flexibility to move at your own pace.
If you need help organizing your plan or finding the right financial strategy, check out The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries. It’s an excellent resource for anyone looking to build a business step by step.
Additionally, don’t hesitate to consult a CERTIFIED FINANCIAL PLANNER™ who can offer advice and support as you navigate this exciting journey. A financial planner can help you with budgeting, planning for future growth, and determining whether a loan or grant is the best option for your business.
This approach ensures that your business can grow in a sustainable way, while also minimizing risk. Starting small and working on the side is a great way to bring your entrepreneurial dreams to life without putting your finances on the line.