—
If you’re looking to start a new business, you may have already figured out that simply having a good idea isn’t good enough to get the business on its feet. You need money. But how can you get that money? This is a pressing question for entrepreneurs of all levels of experience, but it can be particularly stressful for young people or those new to the business world.
Businesses can come in all shapes and sizes. They can be designed to solve all kinds of problems and sell all kinds of products and services. But they all have one thing in common, and that’s a certain underlying financial logic. Businesses have to make money and they have to spend money. They need to attract and pay off investors, and they need to pay employees and keep their own lights on. To new entrepreneurs, the prospect of startup finances can be daunting.
There’s no denying that people of means have an advantage when it comes to starting businesses. One look at the demographics of entrepreneurship shows that to be the case, and the raw numbers are undeniable: 82% of startup money comes from either the entrepreneur or their family. Of course, how much you need to start can vary a great deal: you might need $30,000, or you might be starting a micro-business that only requires $5,000 up-front. Do the math to make sure you know exactly how much you’re going to need.
But that doesn’t mean that new entrepreneurs should give up hope. Plenty of businesses are still founded on loans. Firms like Val-Chris Investments in Los Angeles provide private loans to businesses, and private investors are always looking for the next big thing. And relying on loans won’t necessarily put you at enormous personal risk, say the New York tax attorneys at Mackay, Caswell & Callahan: with the right lawyers in your corner, you should be able to set up a legal structure for your business that allows you to take out loans, weather losses, and pay taxes without exposing your private finances to undue risk.
Getting the right investors, funding your dream yourself, and securing a loan at a decent rate are all things that may seem pretty tough at first, but that may be because you’re not at the place in your career where you might most reasonably expect to be starting your own company. This is especially true if you are of college-age or a recent graduate. Despite plenty of well-publicized success stories, entrepreneurs trend older: only 16% are age 35 or younger.
While you continue to contemplate this career move, you can do a lot in the meantime to give your business a better shot at success. You could take business classes, where you would learn more about attracting investors and developing a business. Or, if you’re a younger person, you could take a job with an established company, building your wealth and professional contacts in preparation for your big jump. By the time you start your business, you will find the financial realities of getting it off the ground far more surmountable than it initially seemed.
—
Some links in this post may be paid.
Photo: Getty Images