As the old saying goes, it takes money to make money, and this could not be truer in the world of small to midsize business. Whether you are creating a new startup and need funding to get your business off the ground, or you own an established company that needs funding to grow, your business will almost certainly come upon a time when additional funds are necessary. If you are inexperienced as a business owner or you have not secured additional funding in some time, you may not know where to begin when searching for options.
In that case, this guide is designed especially for you. In today’s business world, there are many options available to secure funding for new startups or existing small to midsize businesses, and there is an option out there for any entrepreneur. The key is identifying the right funding source for your company and then securing the loan, grant or line of credit. Keeping that in mind, here are a few of the best options out there, and you should be able to find the right one for your business.
While this may not be the most appealing option, using your personal funds for your business may be the only option in some cases. If you have the money available– and you are confident in your business plan– this may be preferable to taking out a loan or line of credit, which would incur interest, or giving up equity in your company through other funding sources.
However, although you are undoubtedly confident in your abilities and the potential of your business, you should be careful with using too much of your personal money on any venture. Plus, mixing your personal finance and your business finance can be a slippery slope with many potential dangers.
2. Bank Loans
If you need a loan to start or grow your business, this should be your first option. Traditional bank loans are generally the safest and most trusted option, with low-interest rates and a set payment plan. Unfortunately, the vast majority of applicants are turned down when applying for traditional bank loans, and you should not count on approval if you do not have an established, profitable company.
3. SBA Loans
Another great, yet hard to secure, option for small business funding is an SBA loan. The U.S. Small Business Administration (SBA) does not actually lend the money directly, but they do provide incentives and security to lenders for loaning money to small business owners who qualify. Unfortunately, the qualifications are strict and the competition is fierce for these loans, and this is another option that may be difficult for many entrepreneurs. If you do qualify, there are three types of SBA loans available:
- 7(a) loans are the most common and flexible, very similar to traditional bank loans.
- CDC/504 loans are limited to certain large purchases only.
- Microloans are exactly what they sound like ($500-$50,000), and these are easier to qualify for.
4. Alternative/Online Lenders
In the modern, digital age, online lenders provide flexible funding options for small businesses with less stringent requirements and wait time than traditional loans. The terms, rates, amounts and other elements depend on the specific lender and several factors about your business. Websites like smeloan.sg exist to match small to midsize businesses with the right lenders for them.
Another great product of our modern age, crowdfunding can be one of the best options for those looking to start a new business. Websites like GoFundMe, Kickstarter, and others provide a platform for potential entrepreneurs to pitch their business idea to a large number of potential investors and secure the necessary funding to get off the ground. Unlike a loan, money from crowdfunding is not expected to be repaid directly, but investors can be paid with company equity, advanced products or other means. The only real downside is the large fees charged by the websites.