With all the talk of venture capital funding so many design startups these days, there’s been a lot of internet chatter about the pros and cons of accepting it, taking out a traditional business loan, or just saving up. Combine the deep pockets of venture capitalists with the ever-increasing amount of people who decide to go into business for themselves without really having the knowledge to succeed and you have a potential problem though. Years ago if you started a design business, you’d probably not pay yourself until you turned a profit, but with VC funds flowing freely, a lot of newly minted CEOs are paying themselves quite handsomely and well before the business makes money. A lot of them end up failing way too quickly(image via shutterstock)
You can see the benefits of accepting venture capital funding of course, as it’s a lot like a loan in that you’re being given the funds you need right now. Every agreement is different so you may be able to still regain complete autonomy but you may be beholden to your funders in ways that will prevent you from doing what you want to do, and that’s one of the big reasons people do start their own companies. Last year Forbes published an article about the fact that most businesses wouldn’t even qualify for getting the funding, asking the question of why we keep reading so much about it if most of us couldn’t get it. So what options are truly best for you if you’re starting a new business? (image via shutterstock)
The traditional method of getting a loan is still wildly popular. Loans are harder to get these days though, and we’ve started to see some loan companies emerge that specialize in startups. There are also companies like Deals wesbites that specialize in loans for existing small businesses (and they do have a nice small business loan calculator) who want to expand so these are good bets for a lot of people. It’s important to ensure that you fully understand the terms of your loan though. If you’re just happy to be getting one, you may not be as thorough as you should be so anyone taking out a loan should take the time to go through the terms very carefully (image via shutterstock).
What about simply saving up until you can afford to open a business? Few people can truly manage that these days although some do. Some also continue to work a full time job while they’re getting started so that they have some income coming in while the business grows. Score is a company that provides free small business advice so if you’re opting for this route, a consultation with them would probably be very helpful. They also provide mentors for specific one on one counseling and follow up (image via shutterstock).
There is a lot to be said for not getting into debt to start a design company even though you can get some great competitive loan rates. You may have to start out much smaller than you’d like to and you may not be able to immediately afford a nice office, but it could be worth it to not have the worry of paying a loan back. If you have some other form of income coming in, whether it’s through a partner, spouse, or other job, this could be your best bet. It’s a similar mindset to people shopping with cash only. If you don’t have the money, you’ll be much less likely to spend on something you don’t truly need. However the option of a loan is one that many entrepreneurs will take and there are a lot of benefits to going down that path. You won’t have to worry about where the first funds are coming from so you can better focus on growing your business (image via shutterstock).