Six ways to raise funds for a home-based business

Well begun is half done! This is true about most human endeavors except perhaps an entrepreneurial initiative which is a different animal altogether. Most venture capital investors would say ideation is just 1% while the remaining 99% is about execution when it comes to launching and scaling up startups.

However, a more relevant question for someone who dreams of starting up is how to make the very first move—that is, how to raise the initial amount of funding to give a broad shape to a small idea? In fact, founding a small home-based business can be daunting task for many, especially those who are already burdened with running a family and therefore have limited access to a cash reverse. However, cleverly leveraging available resources and assets can help raise the initial funding.

Here are six ways you can raise funds for a small, home-based businesses.

(1) Borrow from family and friends

The immediate and easily feasible source of funding for an entrepreneur is family and friends mainly because they would at least be ready to listen to your idea (which most VC investors don’t do) out of their linking and concern for you. While the same empathy may prevent them from looking at your idea critically and remind you about possible puddles on the way, they will be forthcoming in chipping in with whatever possible to help you find your feet as an entrepreneur. There are a few benefits: a friend or relative with spare cash will only be happy to lend that to you instead of letting it locked in his/her locker. You are actually giving him/her an opportunity to put the spare cash to work! Also, since you are borrowing from your near and dear ones, they may not bother to count the interest income they may get from you which will essentially let you avail funding with zero interest outgo!

(2) Doing a part-time work

While you would want to break away from what you have been doing to earn your bread while launching a venture (the very trigger for becoming an entrepreneur for many is to escape the monotony of the 9-5 routine at the workplace), you can leverage your expertise and experience to ensure enough cash-flows to streamline the business idea. Since your venture—like a newborn child—is going to take a lot of time, the best way is to continue to do your earlier work on a part-time basis so as to generate basic cash-flows for the venture at the same save enough time to shape up the business idea and giving it wings.

(3) Run another business as a stepping stone

If you think your business idea needs a significant amount of capital, one way to tackle the challenge is to start another business where capital is much less, run it for some time and use the returns generated from the venture to fund the bigger venture. If your original idea needs even bigger funds, you can even think of running the second venture too as a precursor to launching the original idea. So when the second venture creates enough traction, you can use the cash-flows to launch the original big idea.

(4) Selling assets

While scouting for finance from external sources such as friends, banks and angel and VC investors, you may tend to overlook an easy source of finance which is very handy.

We are talking about assets that you own but are not using very actively. For example, you can sell off your old car or used furniture to raise funds to take care of the initial capital needs of your small venture that is taking baby steps. Of course, you may find it difficult to part with a family car that you have been using for years but ensuring cash-flow for your fledgling startup should be a bigger priority—once the business picks up, you can always buy a bigger and better car which your family nay find more comforting.

(5) Pre-selling products

Product firms enjoy a few advantages over service firms and one of them is the opportunity to sell products before they are actually launched as a means to raise money for financing the business. Though often overlooked, pre-selling products can be a highly effective way to ensure cash-flow for operations of your small business at initial stages.

For example, the money raised via product re-sale can be used for paying for your inventory and also enhance your retail operations. However, coordinating the inventory delivery schedule with suppliers in order to fulfill orders on time can be a challenge.

(6) Leveraging invoice advances

If you are into a product business which has already started getting orders from customers, you can use invoice advancing as a means to raise fund for operational needs.  Through invoice advancing, a lending firm or a service provider will provide you the money on invoices that have been billed out and you are supposed to pay back the amount once the customer settles the bill. The amount raised though such advances help companies close the pay gap between billed work and payments to suppliers. This in turn will help firms take up new projects more quickly. This also ensures an uninterrupted cash-flow which can be used to hire workers and scale up the business.