Finding the money you need to fund your warehousing business can be challenging. You'll want to know how much you need, how long it will take to get that money, and what options are available.
You'll also want to determine how much time you have before needing capital for your warehousing business. If there's no rush on getting the funds, then perhaps a more traditional loan is an option for you.
However, if time is of the essence and the amount needed isn't readily available from banks and other traditional sources of financing, crowdfunding may be another option worth exploring further.
One of the crucial things to consider before venturing into the warehousing business is how much capital you need to invest. Of course, the costs will depend on where you are going to set up your warehouse services. But generally speaking, they should be enough to cover the following:
Equipment including containers, forklifts, etc.
Land and building costs
One way to get the funding you need is to take out a loan from a bank. Banks are typically more willing than private or angel investors to provide loans. It is because they have better security in collateral and interest payments. It is good for you, as it means your business will not be shut down if you cannot repay your loan on time. However, there are some downsides:
You must show them your business plan first before applying for a loan. Also, several more times afterward.
The bank will want to see that you have collateral that can be sold off if needed to repay the loan. They may also ask for other collateral, such as personal guarantees from yourself and/or others involved with the project.
Interest rates tend to be higher than other financing options because lenders know they can liquidate assets if needed. But sometimes this isn't necessarily bad news.
Crowdfunding is a way to get funding from a large group of people. You can do it through the internet or by getting donations at events. In addition, you can use your social network to help spread the word about your new business or product. The key to crowdfunding is to have something in place before asking for money online. If you don't have anything ready yet, crowdfunding isn't an option until your business starts making income and profits.
Crowdfunding works best if:
Your product or service already exists and is ready for market.
You have a concrete plan for how much money will be needed over the next few years.
Borrowing from family and friends is a great way to raise capital for your warehousing business, but it's important to be cautious. If you're going to borrow money from your family or friends, make sure you are clear about what you are asking for and how much of the repayment they can expect. Also, before borrowing money from someone close to you, ask yourself if this person understands your financial situation well enough. It may also be wise to have an attorney draw up a contract, so everyone involved knows what needs to be done in case of any problems down the road.
If you have a great idea for a warehousing business and the resources to start it, you could ask for an investment from angel investors. These are wealthy individuals who invest in small businesses and are looking for a return on their investment. They're also looking for ideas that will make them more money than they put in.
To attract an angel investor's attention, think about what makes your warehousing business different from all the others and how you can present that difference so that it stands out as valuable or unique. In addition to presenting your idea as unique and valuable, explain why this is something that needs to exist right now in the world: what problem does it solve? Why would anyone want yours if someone else has already done it?
To raise capital for your warehousing business, you'll want to create a pitch deck before approaching investors. A pitch deck is a presentation you give to convince investors to invest in your business.
It should include:
A Business Plan and Financial Projections: a detailed explanation of how you will use the funds.
A Marketing Plan: how you plan to generate sales.
Milestones and Timeline: when things will be done, including milestones such as hiring employees or launching a website.
Team Members' Experience and Qualifications: who they are, what they've worked on before.
Advisory Board Members: who they are, what companies they have worked with in the past.
The Small Business Administration (SBA) is an agency of the government that offers many types of financial assistance to small businesses. If you're looking for capital, one option is to apply for an SBA loan.
The SBA offers loans up to $500,000, with favorable terms and low fees. This type of loan is designed for businesses that cannot get funding from a bank or angel investor because they don't have enough collateral or experience yet. Instead, the money comes directly from the government through a participating lender like your bank or credit union, which acts as a conduit for the funds but does not issue them directly.
You can also consider borrowing from friends and family, which is often the first strategy that comes to mind. Asking a few rich people you know to invest in your business may sound like an easy way to raise capital, but it's one of the most difficult methods you'll find.
There are a couple of reasons for this: First if you're going to ask for money from people who know and trust you, there needs to be some sort of guarantee that they'll see their investment return. Second, even if they agree to invest their money in your company, there's no guarantee that they'll have enough cash at any given time. It can lead them into debt with lenders themselves or other sources and could be detrimental not only for them but also for your business.
If these two alternatives aren't realistic options for raising capital within your given timeframe and budget constraints, then I recommend looking into crowdfunding platforms such as Fundly if applicable.
Can’t donate? Please share. Even a quick share on Facebook can help.
The average share raises $97.