Funding for Your Business

by | Jan 25, 2020 | Everything Else

So, you’re ready to start your own business. You want to control your own income, schedule, and future? Maybe you even have an audience or a business plan. But where do you get the money to start or grow your business? First, try our instant startup funding page here: 

Beyond that the financing you need to launch, maintain or grow your business can come from a variety of sources, including small business loans from traditional banks and online alternative lenders.

Here are the most common sources of business funding:

1. Credit Cards
2. Banks
3. SBA
4. Online lenders
5. Crowdfunding
6. Credit unions
7. Small business grants
8. Friends & Family
9. Equity Partners / Investors

1. Credit Cards / Personal Credit
For: Individuals who have strong personal credit available to leverage.

If you already have established credit this is sometimes the quickest easiest way for you to get going. Some might leverage a home equity line of credit or even using balance transfers to leverage 0% interest while they establish their business and cash flow.

For: Established businesses with collateral and strong credit.

Traditional banks are a great starting point and can help you figure out where you stand in terms of qualifying for funding. Even if your business doesn’t have a strong enough track record or enough assets as collateral to qualify for a bank loan, talking to someone at a traditional bank can help you figure out what documents you need and what your best options may be.

Locally owned banks, in particular, are a great resource for small businesses because they often have a strong interest in economic development in the community. In the third quarter of 2016, the Federal Deposit Insurance Corp. found that 43% of small loans to businesses came from community banks.

3. SBA
For: Businesses who don’t meet traditional banks’ strict lending criteria.

The U.S. Small Business Administration offers lenders, mostly traditional banks, a federal guarantee on your loan. This makes it less risky for banks to lend you the funds you need to be successful. In guaranteeing the loans, the SBA also connects you with favorable rates offered by traditional lenders. And unlike most bank loans, you can use an SBA loan to start a business.

However, the application process isn’t easy, and you can find yourself trapped under a heap of documents while you work through the appropriate forms. We recommend finding an advocate to help you streamline the process.

4. Online lenders
For: People with shaky personal credit, or who want fast funding or ease of applying.

With traditional banks limiting access to capital, online lenders have seen an increase in popularity. A report by Morgan Stanley predicts they’ll provide 16% of small-business loans by 2020. Online lenders are particularly useful for owners struggling with bad credit or those in need of fast cash. Several of them are able to turn around funding within 24 hours.

Peer-to-peer business lenders are among the alternatives. These lenders cut out the traditional middleman, such as banks, to connect borrowers with individual and institutional investors. The cost of borrowing, however, is much higher; some charge annual percentage rates close to 100%. Still, alternative lenders are an option when a bank says no. The Entrepreneur Advantage recommends both Kabbage and SeedCapital in addition to perhaps leveraging PayPal for a line of credit.

Online lenders offer a variety of financing options, including term loans, lines of credit and invoice factoring.

5. Crowdfunding
For: Businesses with products that can capture the public’s interest.

Crowdfunding sites such as Kickstarter rely on investors to help get an idea or business off the ground, often rewarding them with perks or equity in exchange for cash.

Although the popularity of these services has increased in recent years (the SBA even offers an online course in crowdfunding), there are caveats. For one, your product or company has to be intriguing enough to catch the eye of multiple investors.

In the case of equity crowdfunding, where investors gain a stake in the company, there are strict securities laws and rules to follow for investors and entrepreneurs alike.

6. Credit unions
For: Members who like a personal touch and already work with a Credit Union.

Like banks, credit unions offer favorable rates and loans backed by the SBA. But unlike banks, credit unions have increased their small-business lending 60% since 2008, according to the National Association of Federal Credit Unions.

You’ll likely have to be a member. But the co-op nature of credit unions often ties them to the community, so you may also reap the benefits of more personal relationships and name recognition.

7. Small business grants
For: Free financing.

Small business grants offer a way for business owners to get established or grow, without having to worry about paying back the funds.

Typically offered through nonprofits, government agencies and corporations, some grants focus on specific types of business owners, such as minorities, veterans and women.

The downside to free financing is that everybody wants it. It will take a lot of work to find and apply to grants, but time spent searching for free money opportunities could pay off in the long run.

8. Friends & Family
For: Someone willing to give up some equity and leverage a close partners stronger personal credit.

You might have someone close to you that is looking for this kind of opportunity to both support your endeavor and potentially profit in your success. Simply consider carefully how this can effect your personal relationships before ever going this route!

9. Equity Partners / Investors
For: People with a solid business model with proven numbers.

Do you have an amazing product or idea?! Chances are someone is ready to bankroll that idea for a chance to profit with you. Just be prepared to give up equity and control potentially in your business to accomplish this kind of funding.

All in all there are a lot more creative ideas to fund your business than just these nine above. Feel free to contact a business development specialist at The Entrepreneur Advantage for a free consultation or cash flow analysis on your business goals!

In any event, keep building and creating. Pursue your dreams for if there is a will, there is a way!


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