Traditional bank was an ideal option for small business owners to get finances for startup funding other than personal savings, family and friends. Due to recession, banks have changed the rules and made it more difficult to get loan. The qualification requirement enables a few small businessmen to be approved by banks.
Luckily other than banks, there are plenty of small business financing options which can help you in starting a new business. It is up to you to decide what is available for you and suit your circumstances.
Starting a new business is a process of experimenting, learning and finding various funding options.
Family, friends and self
Most common startup finances used are personal savings and then from family and friends. Make sure when you plan entrepreneurship, it should be solid and profitable before you approach your acquaintances to capture their interest. Explain in detail the benefits they can get by funding in your business.
Personal loan or credit card
Some small owners do not consider credit card loans or personal loan much, but they can be very helpful within the first few years of startup, for the business keep on going. You can use them for covering unexpected expenses while growing your small business.
Small business loans
Government gives small business loans or grants to entrepreneurs, which may be taken through commercial lenders. Online lenders offer business loans too and their lending process is faster. But it is recommended that you have searched and worked on best suited loan for your business plan.
Find people out of your circle who are interested in investing in your business. While working in partnership with an experienced businessman, you will have the peace of mind and it makes you a favorable candidate for more funds from bank. But your solid planning for business is important to convince a partner.
Investors and venture capitalist
This is best for investing in already growing business. Angel investors invest money in a business and requires equity or shares on its behalf. The venture capitalists invest their wealth in large growing businesses such as apps or software businesses and demand shares or equity in business. If you have successful, profitable business and need more funds to expand it, then this option of funding is suitable for you.
You can also get finances for various business requirements such as, equipment financing, invoice financing, grants and short-term loans for low credit score.
While establishing and working on your business you must make plans and list your business requirements. You may need more finances for your business expenses such as:
- Hiring new staff
- Adding new products
- Opening new franchises and stores
- Buying or hiring new equipment
- Buying more inventory
- Working capital for payroll
Getting finances is tempting but never exceed the amount of startup. Loan is never free you have to pay back with the addition of interest money. Investors expect profit on their investments and lenders want their loan back with interest.
Keep an eye on your business performance on monthly basis to keep track of your financial status and requirements.