Whether you’re running an auto shop, buying or selling cars, or otherwise, turning your love of cars into a business can be an excellent way to make a living. However, any business that involves cars is certain to be an expensive one to run, and you might not have the money to fund it immediately. As such, here, we’re going to look at the different ways to fund a business, their pros and cons, and which might be right for you.

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Bootstrapping

This is the process of raising all of the funds for your business, yourself, whether that’s by selling valuable assets of your own, working to raise the money, using a cash windfall or otherwise. This offers the most control and highest degree of ownership and encourages you to be more disciplined with your money since it’s all money that you personally invested. However, most bootstrapped businesses have limited growth potential until they get significant cash flow going, as they don’t have access to much more money.

Borrowing The Money

Also known as debt financing, this effectively means borrowing from others, whether it’s from angel investors, banks, business loan providers like Swoop Funding, or otherwise. You get to retain full ownership and control, again, and you can deduct interest payments from your taxes. However, you are still obligated to make your repayments, including principal and interest. If you’re not able to manage your debt well, it can spiral and take over the business.

Selling Stake In The Business

You can sell part of your equity in the business to welcome stakeholders and their money. This is one of the best ways to get quick access to significant amounts of cash, and you’re not obligated to repay. The right investors can bring valuable networking opportunities and expertise, as well. However, it does reduce your ownership, and a mismatch of values can lead to struggles like with Freshstream. In that instance, they have been accused of ousting the previous owner from the business, which has led to a new host of legal troubles.

Applying For Grants

When you apply for a business grant, you are able to get access to funds that you don’t have to repay, nor do you have to dilute your own ownership over the business. However, grants are not easy to secure. They typically apply to a relatively small portion of business owners, and competition over them can be fierce. You often have to follow strict reporting guidelines on how you spend the money you get, too.

Crowdfunding

If your business is one that’s able to stir a lot of consumer interest, then you could use this to raise funds from a wide range of investors, without selling any stake or going into debt. Crowdfunding usually does not raise all of the money a business needs, however, and you have to publicly expose much of your business plans, leaving you open to greater scrutiny.

Consider the pros and cons carefully, and be sure to find the way of funding your business that works best for you.

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