Mortgage or Save: What Is the Finest Manner To Fund Your Enterprise?


best way to fund your business

I’ve worked for myself for over 15 years. As a result, I’ve gone through many ups and downs in my career, particularly in terms of financial flow. While some times were challenging, I ultimately learned a lot from every experience. I have used a variety of methods to fund my work over the years. I’ve gotten personal loans and business loans, saved up money to launch new projects, used credit cards to get by, accessed grants, crowdsourced funding, and more. What is the best way to fund your business? There’s no one right way but we can explore the pros and cons.

Is Saving The Best Way to Fund Your Business?

Arguably, the best way to fund your business is to save up in advance. Then you would use your savings to launch your business. The reason that people argue that this is the best way to fund your business is because you don’t go into debt with this option. That’s definitely a huge benefit, and so it’s something for you to consider for sure.

If you have saved up money already, then you can definitely use that to launch or add funding to your business. You’re investing in yourself, and there’s a lot to be said for that. When you seek investment funding from others, you can share that you started off by investing in yourself because you believed in your vision. That’s powerful.

Potential Cons to Savings as Business Funding

That said, there are drawbacks to saving to fund your business. They include:

  • Using your personal savings to fund your business circumvents business funding. As a result, you don’t establish or grow your business credit in this way. If you use savings to fund your business, be sure to set up business checking and savings accounts to funnel your money through as a way to offset this issue.
  • Using up your personal savings is frightening. What are you going to do if your business doesn’t work out? Make sure that you have enough in savings to support yourself for 6-12 months in case things go awry. Dedicate yourself to your business but have a Plan B.
  • Your savings are limited. Hopefully you’ve been saving for a long time and have a nice little nest egg. That’s great. However, money does go very quickly in a business. Do you really have enough to fully launch or grow your business? Do some serious financial planning before you take this step so that your savings doesn’t go to waste.
  • Will you have to wait to start or grow your business? If you rely on saving up to start a business, then you might have to wait a long time. If you’re ready to start your business right now, then finding additional funding might make more sense.

Personal and Business Loans to Fund Your Business

I’ve used both personal loans and business loans to fund my business, including to support myself as I’ve struggled to make ends meet with my work. Business loans are definitely a better option than personal loans. In an ideal situation, you want your business separate from yourself even as a sole proprietor. It’s financially and legally a better position to be in. Therefore, you should get your EIN, register your business, and set up business banking accounts.

Once you do those things, you’re in a better position to access business loans. Personally, I think that business loans can be the best way to fund your business. You get a lot of cash all at once, and it’s all funneled through the professional channels of your business. The longer that you’ve been in business and doing well, the easier it is to secure such loans. Of course, you do want to make sure that you have a solid financial plan for using the funds.

Personal Loans Compared to Business Loans

Personal loans are definitely a bit trickier. I’ve used personal loans over time. I have personally found that, compared to business loans:

  • It’s more challenging to get good interest rates.
  • The stress of debt repayment is harder on me.
  • I’ve had access to less money through personal loans.
  • Paying off the loan isn’t as rewarding since it doesn’t build business credit.

That said, I did find it easier to get personal loans, albeit with high interest rates, when my business was new.

So, personally, I would say that loans can be a great way to fund your business, as long as you use them responsibly.

Other Ways of Funding Your Business

Savings and loans are two of the most common ways people fund their small businesses. However, they aren’t the only options. Here are some of the other things I’ve done over the years:

  • Business and personal credit cards. This has the obvious pitfalls, especially when using personal credit. In a pinch, it’s a good option, but only for small amounts with a specific plan in mind.
  • Grants. There are so many grants available to small business owners. It’s challenging to find them and to learn how to apply for them. It’s definitely a process. However, this is FREE money to support your business. I have obtained several grants for women-owned businesses over the past few years. I think when this is an option it’s actually the best way to fund your business.
  • Crowdsourcing funding. For awhile sites like Kickstarter were really popular. They can be a great way to fund business, especially for specific projects. I used this method to fund one of my books. The support feels great. However, it also brings pressure with it. You need to get that product out, and you want it to be good for the people who invested in you.
  • Outside investors. Angel investors, VCs, etc. can all provide terrific ways to fund your small business and take it to the next level. I can’t speak personally to these experiences myself. However, if you’re working in certain industries, such as tech, then this is a very common approach. It’s certainly one to consider.

What do you think is the best way to fund your business?

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