How Outsourcing Can Help Improve our Start-Up Business

Thinking of Starting a Business? Then you’ve probably wondered how you’re going to raise money to move forward.

The good news is that most entrepreneurs have faced this challenge – you are not alone. The difficult task ahead is to get enough money to start and maintain your business before you release a dollar of your income.

Starting a business is not only emotionally difficult – it takes scratching. Unless you have a large sum of cash stored, a rich uncle, or you risk to undergo a massive personal debt, you will need capital (start-up money that finances your business). The solution? Outsource your capital needs with a list of credible options.

Determine your initial costs and financing options

While outsourcing has its criticisms, it can be a sustainable source of capital. Obtaining sufficient capital is the most important factor when starting a business, that is, if you want it to be successful and sustainable.

When outsourcing for capital funds, you need to know exactly how to borrow. Many failed companies share the common mistake of underfunding their businesses. In other words, they do not have enough money to start and manage their business until they reach a point of profitability (when turnover equals total expenses). You need to gather enough money to set up, as well as keep the lights running, until your point of profit is reached.

So how much capital do you need? Start by asking these questions:

• How much money do you need to start your business?
• Do you already have money saved for your business?
• Do you currently have assets for your business (and any assets that can be used as collateral)?
• Are there people (family, friends, foreigners) or organizations willing to invest in your business?
• What does your credit score look like?

Many homeowners inherit a mass of personal debt to turn a passion into reality. Some might close the prospect of assuming more debt to outsource critical business operations. However, the value of outsourcing operations and, consequently, of importance, outweighs the initial cost.

Our economy is a challenge. The search for start-up money is even more difficult.

Top 8 financing and outsourcing options

Here are the top eight financing options and outsourcing to help your startup business get started quickly:

1. Personal savings

Personal savings should be your first source of start-up funding. In general, 25% to 50% of your start-up costs should come from your personal savings. Start saving now to see real benefits later.

By using the money, you will help banks or other potential lenders see your willingness to accept the risk and your commitment to success. As you continue your business, an empirical rule is to personally invest at least 25%. Banks like to see equity or ownership of your business.

2. Government Funds

Federal, state and local governments provide financing opportunities for businesses, especially small businesses. Here are two types of government assistance:

• Subsidies. The attractive quality of government subsidies: low-interest loans, scientific and economic development grants, and venture capital. You may be eligible for a government grant if you rank in a particular or demographic category.
• Loans. There are a variety of loan programs available through the US Small Business Administration. That is where most of the government money comes in. Unlike the subsidy, loans must be repaid plus interest.

Each grant or loan is accompanied by its own criteria and qualifications, so be sure to read all the documents to see if your business qualifies.

_3. Commercial lending (banking)

Commercial lending by financial institutions accounts for approximately 44% of financing. Here are the two types of bank loans:

• Long-term loans. Long-term loans are used for large expenses and fixed assets – think about the assets you plan to use for more than a year. These loans are usually secured with some form of collateral.
• Short-term borrowing. Short-term loans are for small expenses and everyday expenses – think about the assets you plan to use for less than a year.

Examples are credit cards and lines of credit. Credit cards can be a viable option when used wisely to finance your business. They can be a great advantage to pay for current expenses that you currently do not have. Be cautious when using a credit card, and stay on top of the payments – otherwise your credit score will be negatively affected.

Financial institutions look for “4 Cs” when reviewing your loan application:

• Cash flow. Are you reimbursing the money you borrow?
• Guarantees. What is the value of the asset that you undertake to insure your loan repayment?
• Commitment. How much money do you want to put personally on your business?
• Character. Do you have a good credit score?

In addition to the 4 Cs, there are other ways to make a good impression and increase your chances of loan approval:

• Make sure your management is strong
• Have a steady growth in business
• have proven future cash flows
• Provide guarantees
• Increase your credit score as high as possible
• Never miss a loan payment and always on time

4. Micro-laurel

Maybe a commercial loan is not in the cards because you do not have a credit history or you can not get a loan from a bank. There is still hope for your loan needs with a microlou. With several hundred in the US, a microchip can give you a smaller loan, ranging from $ 500 to $ 35,000, with greater flexibility than a bank.

5. Crowdfunding

Crowdfunding involves people (family, friends, aliens) by making an online donation to your cause or your goal. An example .

You set the purpose of the money with a delay and others will help you by adding money. This is a good choice for single-time projects, but not long-term, continuous cash flow. More than 100,000 people have donated to the Kickstarter projects. Other sources of crowdfunding include, and GoFundMe.

6. 401 (k)

Your retirement funds are another potential source of financing for a company. However, keep in mind that it carries risks – if your business fails, you risk losing a significant portion of your retirement. So if you’re using your 401 (k), or similar pension funds, do it as part of a broader and diverse set of funding agreements.

7. Factoring

Factoring is when a company sells its receivables at a discounted price to get cash. Companies that tend to use this method are garment manufacturers, as they must satisfy customers’ orders before receiving payment. Be aware that this is an expensive way to secure money. Interest rates are high and fees are high.

Loans from family and friends

Asking for money from family and friends is a very prudent source of income. Obtaining a loan from a close relative can harm the relationship and risk its financial future.

Suggestions to follow this route are as follows:

• have a concrete business plan before speaking
• Choose a moment to talk when there is no distraction
• Offer a specific business plan
• Provide an evidence-based plan that determines when they will receive a refund