Every year in the United States, about 600,000 new businesses open up.
Are you planning to join the list of entrepreneurs who will start a small business this year? Thumbs up!
However, if you’re anything like the average entrepreneur, there’s one burning question in your mind: How much does it cost to start a business?
Considering that 82 percent of businesses that fail do so because of cash flow problems, you don’t want to start your business without adequate capital at hand.
The good news? You can raise funds from other sources.
Continue reading to learn more about business startup costs and some of the top funding options.
How Much Does It Cost to Start a Business?
You’re probably expecting a ballpark figure, but that’s not how this works. Every business has unique capital demands.
As such, the amount you will need to open a new business will depend on the nature of the business, as well as factors like industry regulations and economic conditions.
For example, it costs a lot more money to start a restaurant than it costs to start an ecommerce store for selling handmade crafts. A restaurant is space and equipment-intensive, which cost tens of thousands of dollars. On the other hand, an ecommerce store owner’s biggest expense is setting up a website.
A good way to know how much your business will cost is to hire a small biz specialist to write your business plan. This professional will analyze your idea and use their expertise to make a fair estimate of the business’ capital requirements.
The Top Funding Options
Now that you know how to determine your business startup costs, let’s focus on how to raise the money. Here are some of the top funding options.
1. Business Loans
Thirty-four percent of entrepreneurs rely on bank loans for startup capital. This makes business loans a top funding option for you.
The first step to getting a business loan is to identify your preferred lender. Ideally, this should be a local bank or credit union with a reputation for making loans to small businesses. There are also online companies that specialize in offering business loans.
Although it’s possible to get an unsecured business loan, your best bet is to pursue asset based lending. If you’ve got an asset, such a car or a house, you can use the title to secure a loan. Use the money to fund your business idea.
2. Equity Investment
When you set up a business, you own 100 percent of it. Did you know you can give away a certain percentage in exchange for funding? This is known as equity capital.
However, equity investment isn’t for every other kind of business. Equity investors love startups with high growth potential.
3. Personal Funds (Bootstrapping)
If you want to retain full control of your business and not have any debt obligations, consider self-funding.
If you can raise the money you need to start your business from your savings or day job salary, well and good. But if you’re low on cash, don’t shy away from withdrawing from your retirement account or selling personal assets. As long as you’ve got a good business idea, you’ll make enough profit to refund your retirement account.
Funding Your New Business Simplified!
So, how much does it cost to start a business?
In truth, there’s no specific figure. But having read this guide, you now know the factors that will determine your startup costs. You also know how you can raise this capital.
All the best and keep reading our blog for more small business tips.