10 Ways to Finance Your Business | Brian Tracy

Summary

In this video, Brian Tracy shares 10 ways to finance a new business. He emphasizes the importance of using personal funds, angel investors, and friends or family to start a business, along with options like credit cards, bank loans, and microloans. Tracy also explores social lending, trade credit, and customer prepayments as alternative sources of capital. He stresses the necessity of being creative, determined, and resourceful to succeed in business, even with limited funds. Tracy’s insights provide practical advice for entrepreneurs seeking funding to launch or grow their ventures.

Takeaways

• 😀 68% of startup financing comes directly from the business owner's own pocket.
• 😀 Using your own money to finance a business is crucial; without it, investors may not trust you enough to lend you money.
• 😀 Angel investors are individuals who invest their own money in startups, offering both capital and industry knowledge.
• 😀 The advantage of angel investors is quick decision-making, but they may demand a significant share of your business and want protection through control rights.
• 😀 Raising money from friends and family is common, but it requires clear agreements in writing to avoid misunderstandings about repayment.
• 😀 Credit cards can provide quick access to capital, but they come with high interest rates, making it important to pay back quickly.
• 😀 Banks typically do not lend money to startups unless you have a solid business plan, realistic financial projections, and collateral to back up the loan.
• 😀 Micro loans, provided by entities like the Small Business Administration (SBA), offer small loans with strict conditions but are accessible to those with good business ideas.
• 😀 Social lending platforms allow individuals to lend money to businesses, pooling funds from various people to offer loans to entrepreneurs.
• 😀 Trade credit, where you receive credit from suppliers or customers, can help businesses start without upfront capital and is based on trust and reliable sales.
• 😀 Customers can also be a source of financing by paying deposits or full advance payments for services, enabling businesses to fund their operations without external loans.

Q & A

What is the most common source of financing for startups, according to Brian Tracy?

The most common source of financing for startups is the personal savings of the business owner, accounting for 68% of startup financing.

Why does Brian Tracy disagree with the advice to avoid using your own money for your business?

Brian Tracy disagrees because he believes that no one will invest in your business unless you demonstrate your own financial commitment. Using your own money shows dedication and reduces the risk for potential investors.

What are angel investors and what do they typically bring to a business?

Angel investors are individuals who invest their own money in startups. In addition to capital, they bring valuable industry knowledge and guidance, helping with product development, marketing, and sales.

What are the potential downsides of using angel investors for financing?

The downsides of using angel investors include giving up a portion of your business, and in some cases, they may want the right to take control of the business if projections are not met.

What is 'love money,' and what are the key considerations when borrowing from friends and family?

'Love money' refers to funds borrowed from friends and family, who lend money out of affection. The key consideration is to put everything in writing, clearly outlining the terms of repayment to avoid personal conflicts.

What are the risks associated with using credit cards for business financing?

The risks of using credit cards include high-interest rates, which can accumulate rapidly if the borrowed amount is not repaid quickly. This can create significant financial pressure on the business.

Why is it difficult for startups to obtain bank loans?

Bank loans are hard to obtain for startups because banks focus on ensuring loans are repaid. They require solid business plans, realistic financial projections, and collateral before they approve a loan.

What are micro loans, and who typically offers them?

Micro loans are small loans typically offered by nonprofit organizations or the Small Business Administration (SBA) to help small businesses either get started or manage difficult times.

How does social lending work, and what is one of its key features?

Social lending involves borrowing from individual lenders through online platforms. One of its key features is that loans are funded by a pool of individual investors, often at more favorable terms than traditional bank loans.

What is trade credit, and how can it help a startup?

Trade credit is a financing method where suppliers or customers provide goods or services on credit, allowing startups to operate without upfront capital. It helps businesses grow by using trust-based credit.

What is the advantage of getting customer deposits or prepayments in a startup?

Getting customer deposits or prepayments helps fund the startup's operations before it begins selling products or services. It allows the business to use incoming funds to cover initial costs and build momentum.

What does Brian Tracy suggest about using venture capitalists for business financing?

Brian Tracy explains that venture capitalists can provide significant funding and expertise, but they often require control over the business and have high growth expectations, which can be challenging for entrepreneurs.