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Five Ways to Fund Your Business

Home Business Magazine Online

It is not always easy to fund a small business. However, when you need money to get your idea off the ground or grow your company, you have options. Small business loans are just at the tip of the iceberg. You can fund startup costs with a business credit card or line of credit. You can try crowdfunding to raise money for your big idea. If you only need a small amount of money, a microloan might be the best option. In addition, if you want to grow your company, attracting investment dollars is the best way to do it. Here are some of your options to fund your business.

1) Small Business Loans

Small business loans are available from traditional lenders like banks and non-traditional lenders online. A traditional small business loan takes a little longer to get — usually, the application will take weeks to process. However, if you can afford to wait for your loan money, you will get a better interest rate from most traditional lenders. However, you will need to have been in business for at least two years. Moreover, you will need to show financial statements and other proof that your business is sound.

Non-traditional business loans are the way to go if you need money right away, for example to make payroll, cover daily operating costs, or seize an opportunity that might be gone by the time a traditional loan gets approved. You can apply online and the requirements are a little less strict, so the application processes quickly and you can get your money in a matter of days, rather than weeks.

2) Business Credit Cards or Lines of Credit

Business credit cards and lines of credit allow you to borrow as much as you need up to the credit limit. You can get a business credit card or line of credit using your personal credit score and finances, so they are easy to get even if your business is still very new. However, in order to make this source of funding work to cover startup costs, you are going to need to keep those costs to a minimum and perhaps bring in additional sources of funding, like personal savings or a loan from family. Once you are doing business, you can use a business credit card or line of credit to keep track of what you buy for your business, so you will have that info at tax time.

3) Crowdfunding

Crowdfunding is a new and popular way to generate the capital needed to start a business. You will need to build up buzz for your product online in order to appeal to your customer base and meet your target. If you use a rewards-based crowdfunding platform like Kickstarter, you will need to be prepared to offer donors something in exchange for their donation. Usually, people offer branded merchandise, event tickets, or early access to new products.

4) Microloans

Sometimes you just do not need a huge amount of money to meet your business needs. If you need a loan smaller than $50,000, you should consider a microloan. The U.S. Small Business Administration offers microloans of less than $50,000 to entrepreneurs looking to start or grow their businesses. These loans are not available through traditional lenders, but through a network of non-profit lenders. The microloan program is designed to offer funding to business owners in low-income areas and small businesses that would not necessarily qualify for traditional funding. The average SBA microloan in 2020 was $14,434 with an interest rate of 6.5 percent. Forty-seven percent of those loans went to businesses owned by women.

5) Investment

If you want to grow your business into a large company, attracting investment may be your best way to proceed. You might need to give up some equity in the company to your investors, and there will be an expectation that the business will grow exponentially, providing those investors with a big return on their investment. Venture capital firms tend to want to work with the kind of startups that can scale rapidly, while angel investors are usually more interested in investing in small businesses. You can find an investor using the crowdfunding platform like Mainvest, for small businesses, or Wefund, for businesses that want to scale.

Final Notes

Finding funding when you need it is one of the biggest challenges you will face as a small business owner. Make sure you understand your small business funding options, so you can get the money you need to start and grow your company and be your own boss.

The post Five Ways to Fund Your Business appeared first on Home Business Magazine.

Original source: https://homebusinessmag.com/business-start-up/raising-money/five-ways-fund-business/

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