In these difficult times, everyone is trying to make a living while working harder than before. Some will decide to start their own business after getting tired of working for someone else. If you are one of these people, than this article could provide some insights on what you need to do to finance your business.
There are more ways apart from personal investment to finance a start-up business. More than half of small business use some type of outside financing, including bank loans, online loans, business credit cards, etc. There is a wide variety of lending options available for a startup business, but they all come with their own advantages and disadvantages, as well as varying terms and conditions. In the article below you will find 3 commonly used ways to finance a new business.
Loans for small businesses
Obtaining a small business loan or a microloan is one of the most popular ways to finance a startup business. Business loans come in a wide variety of shapes and forms, including traditional bank loans, online loans, union loans and many other overdraft alternatives.
All of them ask for different requirements, so regardless of what your credit rating is, you still will be able to get a loan. Some loans have short repayment terms, usually ranging from 6 to 24 months, while others have long terms of up to 30 years. The repayment term usually depends of the amount of cash you will need. The amount of money for small business loans can range from $13,000 to $1.2 million, with average interest rates between 7.75% to 10.25% .
The process from application to funding can range between a couple of hours to a couple of weeks, depending on the type of lender you choose. Small business loans are can be a fast and convenient way to get the money you need for a startup business.
Crowdfunding
Crowdfunding is another additional choice for small businesses to get the funds they need. It refers to the practice of raising money from a large number of people. Crowdfunding is also known as grassroots financing, which is used not only by businesses but also politicians who are running for office and taking donations to finance their campaigns.
For a new entrepreneur, this type of financing is particularly convenient if you are ineligible for a small business loan. Anyone who is interested in investing or making a donation can do so by viewing your startup business or project on a crowdfunding website. Crowdfunding websites work by asking a large number of people to donate money, usually in small amounts, during a specific period of time. Some websites ask you to give contributors a gift in return, such early access to the goods.
Startup Grants
Applying for a small business grant, which offers money you do not have to pay back, may be a good idea if securing a small business loan does not appeal to you. One thing about business grants is that everyone wants them. Therefore this method is the least promising out of all the three ways to finance a startup business. Since competition is often tight , you will need to think of creative ways to distinguish your company when applying.
Startup grants usually ask for high requirements and have rigorous criteria. The application process is more complicated than the other traditional ways of financing. Startup grants can come from a variety of sources and can be used for different business-related purposes that help the business. The amount you can get from startup grants, as well as the time interval in which you get the funds, varies depending on the grant type.
Final words
With all the available options today, you do not have to wait to make your dream come true. However, even though there are many small business lending options to choose from, that does not necessarily mean that they all are going to be available for you. Or that they are a good choice for your business. So, before you apply for any type of loan or any other financing option, make sure it is exactly what you need to pursue your goals.