Like HowStuffWorks on Facebook!

10 Ways to Finance a New Business


1
Customers
Turning your clients into investors may help you raise needed funding.
Turning your clients into investors may help you raise needed funding.
Medioimages/Photodisc/Getty Images

Now, this one might seem illogical at first. How can customers help finance your new business if it isn't even a business yet?

The trick is to use your business plan and your charm to convince people to become your customer even before your business is off the ground. Let's say, for example, that you want to start a company that builds custom computers for videogame enthusiasts. You build a prototype of your computer, bring it to a videogame convention and a large computer retailer wants to buy 1,000 units.

You don't have supplies to build 1,000 units and no bank is going to give you a loan to cover the costs since you're working out of your parents' basement. You can have the retailer sign a letter of credit saying it will pay for the 1,000 units upon delivery [source: Entrepreneur]. With that letter of credit, you can convince suppliers to offer trade credit until the computers are delivered.

Here's another customer-based technique. Let's say you're a hairdresser with a loyal clientele. If you decide to start your own beauty salon, you might want to ask your long-time clients to become investors. Throw in free haircuts for life, and you may have yourself a deal.

For lots more information about starting a new business, follow the links on the next page.


More to Explore