There are so many challenges involved when it comes to financing a business startup. Finding a business partner who’d be willing to finance your small business is like finding a needle in a haystack. You’ll also have concerns you’ll want to factor in before choosing just any lender. These might include their rates, repayment terms, and how much they’d be willing to lend you.
Finding the means to finance your startup is not only a requirement but a prerequisite. While not all lending options will be the same, they might help to acquire you the most crucial supplies such as office supplies. We are living in hard economic times and it can be challenging to find the funds to see your business ideas come to fruition. To help you achieve your dreams of running a successful business, below are twelve financing sources available for your small business. They include:-
1. SME Loans
As the title suggests, it’s all about financing a small business. Even so, applying for a small business loan, though small, can seem a bit tricky. But then again, this will be a boost that will help to see your business take off the ground. Amidst all the financial hurdles you could be going through, you can apply for a small business loan and achieve what the pacemakers have achieved over a course of time.
Depending on the nature of your business, you’ll want an SME (small and medium-sized enterprises) loan that is best suited to your specific needs. It’s for this reason that the guys at Advancepoint Capital advise you to consider your options before taking out a loan to finance your small business. This is because there’s so much in line and without doing your math right, it could end up hurting your business. With this in mind, below are crucial factors to consider before applying for an SME loan:
- Size of your business – Of course, when running a small business, you’ll want a financing option that will help to take you to the next level. However, ensure that you’ll have enough to pay back.
- Qualifications – Not every small business will qualify for a small business loan. This will be determined by your credit history, your income, and whether you can comfortably afford the payments.
- The time your business has been in operation – Unless you are dealing with a private lender, most if not all financial institutions out there will require that your business has been in operation for at least 1-2 years.
3. Government Grants
You have no reasons to worry if you did not vote in the last elections, especially when applying for any form of a government grant to finance your small business. As long as you are a citizen in the state you belong to, you could qualify for a government grant. But it’s not as easy as it might sound. There will be a handful of criteria and requirements to meet. You might be required to go through a vetting process that might seem painstakingly long. Nonetheless, government grants are amongst the cheapest small business loan options you could think of. They have cheaper repayment plans and low-interest rates.
4. Savings
If you have already opened a business and are finding it hard to operate it, you could dig into your savings to help fund the most demanding areas in your business. Some retirees have successfully managed to run their small businesses through their 401(k) retirement savings. Nonetheless, you’ll need to be extra cautious because come to think about it, these are sums of money you saved up for all the years you worked a 9-5 job. There are risks involved and risks we’ll not go into right now.
5. Investor Funding
If you are running a successful business that has lots of potential, you’ll be interested to know that there are so many investors who’d be willing to partner up with you. Ever watched Shark Tank? The same principles are applied in investor funding. This is where you get to pitch your business ideas to an investor, or what will commonly be referred to as angel investors.
After pitching your business ideas, they may or may not agree with your business proposals. Either way, you’ll be exposed to investors with a vast number of years in the field, they’ll mentor you, and they might just provide you with the funds you need to see your business succeed. While this might be a game-changer, it might expose you to some risk factors that include giving up a huge portion of your business.
6. Have You Considered Asset Lending?
If you are running a small business, chances are that you don’t have enough business assets you’ll be willing to forfeit to be granted a loan. But if you have assets that can be turned into collateral for that cash, it will be of utmost importance that you weigh the risks involved as not all asset-based lending options will work to your advantage. The last thing you want is to lose your valuable assets to a lender. But if you have a range of disposable assets, they could be used to finance your small business.
7. Bank Loans
There are so many banks out there who will be willing to fund your business growth ideas. But unlike in yesteryears, bank lending requirements have gotten much stricter. With the best credit score, however, you could count yourself lucky for the immense support your bank can provide you with. This could range from credit card loans, personal loans, and business loans. However, you will need to have saved with your bank for a specified time. While the lending processes in some banks can be lengthy, you can bet that various banks have lower interest rates and affordable repayment terms.
8. Peer-To-Peer Lending
Also known as P2P, peer to peer lending has become a financing option for not only personal uses but also for financing businesses. This option provides borrowers with quite a lot of benefits including fast loan approvals, a loan contract that protects you from huge financial losses, and there’s minimal paperwork involved. These, to mention but a few, are some of the perks of P2P lending. Additionally, most P2P lending institutions are readily and freely available through mobile apps meaning that you are just a few taps away from securing yourself the funding you need to help boost your small business.
9. Finances From Family And Friends
There’s that one uncle who has always been on your side and has supported you although your life; coming to your 1st birthday, your graduation in high school, and now, they are willing to support the small business that looks, well, not so lucrative at the moment, but they are willing to risk their money to see you succeed. Use them! There’s also that one friend in your school days you defended from bullies and now, they are the hotshots in the corporate world. Well, it’s payback time! Loans from friends and family are cheaper and they might also give you a grace period.
10. Borrow Against Your Insurance Policy
Depending on the type of insurance policy you applied, you could borrow against it. Not so many insurance companies will allow this and this is the reason to be thorough before applying just any insurance policy. The best part is that you could borrow what you’ve earned on the insurance’s interest, meaning that you’ll accrue 0% on the loan’s net cost. One thing to note is that you’ll be borrowing against what you’ve already saved and you are also allowed to use the loan to finance your small business.
11. Partner Up
There are of course clients who’ve been with you through thick and thin or suppliers you are indebted to by their unreserved understanding. These are people who know your situation and if asked, they’d be willing to partner up with you through a joint venture. Joining forces could help in sharing the most expensive costs that are costing your business lots of money. This could, at the end of the day, secure your assets, and expose you to business opportunities while at it. However, you’ll want to come up with a well-structured agreement from an experienced business attorney. This will help to ensure that there’s fairness in cost-sharing as well as protecting you from the risks associated with joint ventures.
12. Bootstrap!
This might sound a bit unfamiliar to so many entrepreneurs but it has worked for many. In business, it’s all about how patient you are willing to be to see your business grow. You’ve, of course, read stories of renowned brands that started from scratch and never had to borrow a dime, lest for gas money! These are testimonies that can help to motivate you to run your business with your personal finances meaning that you get to maintain your business assets, control, and pride.
As they say in the west, there are a million ways to die there! While it might come as a surprise, the same applies when it comes to financing your business start-up or already existing small business. Today, you don’t need to have a high credit score to take up loans. Just go by the above tips and they could see you become the next big thing!