It’s generally a catch 22. You’ve got a great business idea that will generate money, but you don’t have initial financial resources to kick it off. Like the setups we do at Startusup™ you need money to ultimately make money. We understand that most clients starting out don’t have cash resources to lean on both for those starting costs and to live off during the time consuming build-up phase.
But luckily there’s a few ways to skin a cat (although a cat skin business may not be real profitable…). So here are 8 potential avenues to explore to get that initial setup paid for, and the rest flow from growing earnings.
1. Love thy family
Our parents can drive us up the wall sometimes, but, luckily they love us all the same and this makes leverage for a potential family loan. Just make sure however you have clear terms and conditions and write it down and both sign it. Only borrow as little as you can. If you borrow more, you’ll spend it, possibly unnecessarily.
2. Crowd Funding
There’s great avenues now for crowd funding online. This works well for product ideas as you can then offer those funding something tangible back, and or, they can see something tangible in the marketplace. Carefully check what you promise and the policies of the funding platform. A few to name are gofundme.com, ozcrowd.com, venturecrowd.com.au.
3. Unsecured loan
Peer to Peer lending is just starting to pop its head up here in Australia, which although at higher rates due to the risk, does open up the opportunity of unsecured lending – unlike what most of the banks offer. Check out societyone.com.au, ratesetter.com.au, thincats.com.au.
4. Secured loan
If you have some real estate equity (or even if a family member does), then a split loan for your business start-up can be done with any major lender. Just make sure your loan is split and used just for this purpose so the interest on just that part can be apportioned for tax purposes.
5.Stay employed and work harder
You may decide for a softer start over a couple of years where you can stay employed and use your disposable income to slowly setup your infrastructure and slowly bring in clients in your outside work time. I’ve done this myself and it works well as you’re not using actual lending to get started and pay back, but of course it takes longer. Still, this longer process allows you to develop more robust and effective systems for when you make the full jump and growth kicks up a notch.
6. Do a deal with the devil
Depending on your business, you may be able to nestle yourself beside a complimentary business. This is common for things like mortgage broking and financial planning nestled beside an accounting firm. Commonly an agreement with the accounting firm would provide you with premises, furniture, computer infrastructure and maybe admin resources, but also with a time orientated claw back once you reach a financial level – so they can recoup the effective loan to you. Because of the risk to the incubator, the payback can be harsh so you need to negotiate a good deal up front. Still, it’s a great way to professionally kick off with some support of like-minded professionals.
7. Howdy partner
I hate bringing in partners to businesses. It always goes sour at some point. But it is a way to get started before you ultimately break away – financially and in human resource. You may be lucky enough to have a silent partner – but get a fantastically good written agreement drawn up to ensure they stay silent!
8. Professional fee funding
If you’re using an entrepreneur mentor specialist like Startusup™ who can package up most of your start-up costs, then they may offer professional fee funding like we do, meaning, you can effectively get an unsecured loan for their fees (most of your initial costs).
Now we’re not suggesting that these are the easiest, all of, or most appropriate ways for you to obtain funding to start your business, but it all has to start somewhere. I won’t lie, it’s going to be a lot of work to begin with. However spending that initial money on the right advice will keep you out of trouble and likely pay much bigger dividends in time to come.
Startusup™ can package a lot of setup costs in one set price and we do offer professional fee funding and relationships with lenders to get you over that first line.
Dean Milner | Startusup™ Technical Talent