Regardless of the type of pet business you ultimately decide to start or buy, there is no doubt that you will require at least some start-up capital to get your business off the ground and running. There are few businesses that can be started with absolutely no capital. The amount of capital you may require to start your business can vary based on the type of business as well as the types and amounts of supplies you need to have along with whether you need to carry an initial inventory.
It is important to keep in mind that one of the main reasons why many small businesses ultimately fail is because there was not a sufficient amount of start-up funds in place. Money is necessary for everything from property to equipment to payroll for employees.
There are two major ways you can finance the start-up of your business. Debt financing refers to borrowing money that will be later repaid in most cases with interest. Equity financing involves raising funds by selling ownership rights in the company. Equity holders may be creditors, proprietors or stockholders Equity investors receive a profit percentage.
Here are the common forms to obtain funds for your pet business:
Savings
Even if you plan to seek some type of loan later on, keep in mind that most banks will be more willing to loan you money if you are able to contribute some of your own funds to start-up the business. Many banks will actually decline a loan request if you are not able to make an investment in your own business.
Friends and Family Loans
It may feel uncomfortable to ask friends and family members for money, but this can actually be an excellent source for the start-up funds you need to open your business. To avoid any possible complications it is a good idea to make sure you have a written agreement in place that state all of the details and terms of the loan. You certainly do not want to find yourself in a situation where you argue with friends or family over money. Just because you are asking to borrow money from people you know is no reason not to present your proposal in a completely professional manner. Have a business plan written in advance and be prepared to answer any questions they may have about your business idea.
Small Business Loans
Many entrepreneurs choose to go with this option; however, before you attempt to attain a loan you should keep in mind there are many factors which may be associated with a small business loan such as interest rates as well as collateral and late charges. One of the best options for obtaining a small business loan is your local community bank. If you are not able to receive approval through a local bank you might consider going through the SBA for a SBA loan.
Partnerships
Another option would be to locate a business partner and make use of their funds to finance the start-up of your business. You will need to usually have a well thought out business plan and be able to provide them with sound reasoning as to why they should invest in your business. Although the terms can vary based on individual agreements, in exchange for their investment, most business partners will receive a share of the business and a portion of the profits.
Capital Investors
Venture capitalists may also be options for financing your business start-up or purchase. A venture capitalist is a professional who invests in businesses that demonstrate a potential for high growth. Venture capitalists provide funding by investing in a business, but they may also be able to provide sound business strategies and advice, which can be helpful if you have never opened a business before. Keep in mind that while this can be of benefit, it also means that the venture capitalist will have some say in regards to how your business is operated.
A small business investment company may also be able to assist you with start-up funding. This option is a venture capitalist which specializes in small businesses. They may often partner with government entities in order to provide a small business with funding in exchange for a share of ownership in the business.
Angel Investors
Angel investors are yet another option to raise capital to buy a business or for your business start-up expenses. An angel investor is a private investor who chooses to invest money in your business based on the belief that within a period of time they will achieve a higher return on the investment they have made. Starting a small business can be risky so the angel investor must accept this risk and understand that if your business does not success they will not see any return on their investment. An angel investor may consequently desire a guaranteed exit provision in the event of the business failing. You may be able to locate angel investors by networking with small business professionals and other business owners.
Credit Cards
One option for debt financing is to use a credit card, although you should carefully consider this option before you pursue it. A credit card could seem as though it would be a fast solution for financing your business but you should also consider the interest rates and terms that apply.
Before you move ahead with securing capital for funding your small business expenses you should first make sure you know how much start-up capital you will need to get your business off the ground. Keep in mind that many entrepreneurs actually underestimate the amount of money they will need to get their business running. You should always make sure you have allowed some room for unexpected expenses, such as equipment failure, replacements, emergencies, etc.
Having some extra money set aside for emergencies or in a rainy day fund is not only smart but can also mean the difference between your business succeeding and failing. Do not make the mistake of underestimating how much money you will need to keep your business afloat during the early days while you are working at turning a profit.
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