The road to starting a business can often feel long and overwhelming. Whether you are still trying to develop your next great business idea, you are looking to hire your first employee or you are searching for a way to finance your venture, there is quite a lot to work on when you are just starting out. Although, the latter tends to be one of the most intimidating steps to new business owners. Luckily, it isn’t as tough as it sounds – you simply need to know where to look.
Here are just 7 funding options worth considering for your next business venture.
One of the easiest ways, and often overlooked ways, to fund your business is by tapping into your own personal funds. If you have a pretty good chunk of money sitting in your savings account, consider setting a portion of it aside for your business. Investors will be much more willing to invest in your business if they know that you’re personally committed to the cause.
Credit cards can be a quick and easy source of funding for your business…if you pay them off on-time. Keep in mind that credit cards come with high interest rates, which can increase even more if you miss a payment. And it may be difficult to make payments on a credit card when your business is new. Credit cards are a popular way to finance new businesses, just make sure you know what you are getting into before you apply for one.
Perhaps one of the most common methods of funding a business is with a bank loan. If the thought of sky high credit card interest rates makes you cringe, you may want to consider this funding source instead. As of late, banks have become stricter with who they will lend loans to. But, if you have a great credit score and collateral, you shouldn’t have any problems with obtaining one.
The Small Business Administration (SBA) offers two types of loans that can help borrowers grow their business. The 7(a) Loan Program grants loans to launch or expand a business, but you are more likely to obtain one if you have been in business for a few years. There is no minimum amount for this type of loan, although the SBA won’t back a loan over $5 million.
On the other hand, the Microloan Program provides loans to business owners of up to $50,000. Microloans are great for purchasing equipment, supplies and any other things you’ll need for your business. These SBA loans are both good options worth considering for your business.
Another funding source worth considering are angel investors. Angel investors are well-off individuals that like to invest in startups, in exchange for 20 to 25 percent return on their investment. It’s important to note that very few institutional investors are willing to invest an amount smaller than $2 million, but angel investors will often invest anywhere from $25,000 to $100,000 without a problem. This is a great option if you don’t need a large chunk of cash, but you could use some help getting your business off the ground.
Crowdfunding has been taking the internet by storm in the past few years. Many successful businesses have found their start on crowdfunding sites. Not only is it a great way to obtain financing for your business, but it will give you an idea of whether or not there’s a market for your business venture. Harness the power of the Internet by giving crowdfunding a try. You never know who will be willing to donate to your business!
FRIENDS AND FAMILY
Last but not least, consider those who are closest to you: your friends and family. If you don’t have a lot of your own money to invest or if obtaining a bank loan is out of the question, you can always turn to the people who you know best. Persuading family and friends to donate to your business will be much easier than persuading the bank lender to grant you that loan you don’t qualify for.
Keep in mind that borrowing money from those closest to you also comes with its fair share of risks. If your business fails or you aren’t able to repay the loan as soon as you hoped, your relationships with them can take a blow. If you do decide to borrow from your family friends, make sure you outline all of the terms of the loan, as you would with any traditional bank loan. This way, your personal relationships won’t be destroyed if things don’t go as originally planned.
Chances are, unless you’re a millionaire from the get-go, you don’t have a lot of your money to put towards building your business. This is when finding funding sources is necessary (and there are many more than the ones I’ve listed). Just make sure to weigh the pros and cons of each source, and choose the ones that you are most comfortable with. I also recommend tapping into several financing options, instead of putting all of your eggs in one basket. This will provide you with a cushion in-case anything falls through with one of your funding sources.
How do you plan to fund your business?