Starting an automotive business is never easy. And the process becomes even more challenging when finding the most suitable way of financing the start-up. Do you borrow a loan from the bank? Do you exhaust your savings account? Each alternative comes with its strengths and weaknesses. Nonetheless, there are several ways of financing your automotive business.
Sell some of your assets
Selling a few of your assets is a great way or raising money for the new business. If you can sell your current car for £30,000 for example, that’s roughly the amount you would need to start a medium scale automotive business. It might be a tough decision to make but a viable alternative all the same. Note that an asset doesn’t have to be something you currently do not need; sometimes you have make sacrifices on one end in order to successful on the other.
Pre-sell your products
Pre-selling is defined as “conditioning a potential customer in advance for later purchase of a product’. It helps to drive traffic to your website and increase your social media following. It is also a great opportunity to give your customers a discount on various products. The method however comes with one big challenge – coordinating inventory delivery times from the suppliers so that you are able to fulfill orders as required. You should also be careful on how many pre-sale units you go with unless you are fine with back-orders.
Obtain a home equity loan
A home equity loan is a loan given based on the equity at the home of the borrower. It is calculated as the value of the home minus what you owe. These loans have two main advantages over traditional commercial loans.
1. The interests are more flexible
2. They offer lower interests
One major disadvantage of equity loans however, is that it puts your home on the line. If you fail to repay the loan as agreed, you risk foreclosure.
Find an angel investor
Angel investors have helped start up even some of the business giants like Yahoo and Google. Angel investors are people who already have the money and are willing to come in and be part of the business expecting x percent returns on their investment. The investors don’t only bring funds to the investment; most of them come with management experience therefore acting as advisers. This enhances quick decision making and improves chances of success.
A valuable advice for this type of investment is for both the investor and the entrepreneur to ensure that they are the right partners for each other.
Credit card financing
While it comes with several risks, paying from your wallet is never the worst of ideas. The main benefit of credit cards is that the funds are readily available. Another notable benefit of the method is that it has a very low minimum payment.
However, even with those advantages, credit card financing costs you so much money in the long run. When you are starting an automotive business, you are bound to stumble a few times. During this time, you’ll have trouble paying. With credit card interest rates at over 20%, your debt may increase too quickly making it even more difficult to repay.
Depending on a number of factors such as personal preferences and your financial position, there are a few other methods of financing an automotive business. If you plan to be the automotive test driver for your business, ensure that you get theory driving test uk in advance.