Just like any other business, creative businesses also require funding. These funds may be for starting the business, buying equipment and supplies, hiring employees, expansion, and many more activities within the business. There are numerous methods of acquiring funds for your business, and in this article, we will discuss 5 ways to fund your creative business.
1. Using Your Own Finances
Many businesses are started with the founder’s own money. You will have to dig deep into your own pockets so as to come up with the funds your business needs. You will more than likely have a limited amount, and this will require you to have a plan. A well thought out plan will make sure the little you have serves you, and your business well for a considerable amount of time. Remember that profits made from the business and invested back into the business still count as funding. Some other sources from which you finance your own business include savings and income generated from other businesses.
2. Crowd Funding
This method of funding has become extremely popular over the years, and it especially caters to talent-based businesses. It is a fun and effective method of getting the funds you need to get your business idea off the ground. Through platforms like Kickstarter and Patreon, you can set a goal for an amount you want to amass over a given time period. Friends, family, and strangers can then pledge to support your project. However, keep in mind that crowdfunding does not serve as a long-term investment solution, rather it is a one-off thing. You can offer incentives to attract more pledges. For example, giving out free products to your supporters.
3. Family and Friends
This is another avenue you can explore, but tread carefully. You can ask family and friends for loans and grants to start your business. Make sure you have a proper business plan in place before borrowing, and formal financial projections as well. This will let your friends and family know you take their money seriously and that you plan on paying back their investments. Also, make sure to stress the risks involved with your creative business, so that they know what they are getting into. When borrowing, set up an arrangement on how they will get back their money. For example, will you pay them interest or give equity.
4. SBA Loans
This is considered one of the smartest ways of funding your business, due to low annual interest rates. The Small Business Administration Loans, as they are also known, are guaranteed by the Federal Agency. This allows lenders to give accommodating terms and low-interest rates. The SBA loan has a limit of up to $5 million. These loans call for a personal guarantee of at least 20% of the owner, and holders of top management positions in the business.
5. Bank Loans
Loans from banks is another way you can finance your small business. However, they are difficult to get due to tight restrictions by the banks. It will take you 2-3 months (from the time you apply), for you to find out whether your loan application has been approved or rejected by the bank. Make sure you have good credit rating, and that you have all the necessary documents before applying for a loan.