The first several years are the hardest for any new business, both in terms of gaining brand recognition and staying afloat financially. Having enough money to support the business in its infant stages is on the mind of every new business owner. While there are many financing options available, when choosing funding, take into account your type of business, your future goals for the business, and how much money you really need. Here are five possible sources of capital that will help you get and keep your business on firm financial footing.
Family and Friends
Most people don’t like to turn to their family and friends for a loan, but remember, these are the people who want to see you succeed. You can avoid a large start-up debt by borrowing a smaller amount. You can also skirt a lot of the legal technicalities usually involved with a bank loan. Money from family and friends can be great when your business is doing well, but be sure that the relationship can also weather the bad times. Stay professional by drawing up an agreement and having both parties sign it; make payments according to that agreement, just as if you were working with a bank.
Small Business Loans
A small business loan can be used to cover all of your business needs. When applying, be careful to provide all the details the lender requests because if you are rejected by three or more lenders, it will show on your credit report and you might have trouble getting anyone to accept you. You can use the money to purchase property or housing for the business, furniture, equipment, and inventory. Small business loans include micro loans, for amounts under $35,000, SBA (Small Business Administration) backed loans from banks, and franchise financing.
Consider using some useful online tools: for example, this absolutely free home loan interest rates comparison tool might turn a great help. It’s Australia-based but I am pretty sure there should be similar one for the country where you reside.
The competition for grant funding is stiff, so do your homework. Once you get a grant award, it is free money in that it does not have to be paid back to the lender. Literally billions of dollars are available in U.S. grants and all states offer them. Be advised, though, that the use of the grant money is usually strictly defined.
On approval, the bank will set you up with either the loan amount or a line of credit. As part of the application, the bank will want information about cash flow and your business plan. It also helps if you keep your personal bank accounts at the bank from which you plan to ask for a loan. Banks tend to trust existing customers who have an established banking record with their institution. You don’t have to use your equity in your business to get the loan, but you pay interest. The bank may require you to provide some personal collateral, such as your home, to back up the loan.
There are around 250,000 private investors in the U.S. who provide funds to small businesses in need of capital assistance. In addition to the funds, many also provide access to their business expertise and contacts.