Do you want to create a small startup business that can help people live more comfortable lives? Do you plan to bring your dream business into reality?
In a world focused on consumerism, a lot of people want to get in on the entrepreneurial side of the equation. It’s one of the reasons why people launch millions of startups per year.
However, not all the potential entrepreneurs have the funding to launch or create a startup.
In this guide, we’ll talk about the top 6 small business funding options. Read on below to find out how you can start up your dream business.
1. Credit Cards
Let’s begin our list with one of the easiest ways to get money for your business. Unlike loans, you don’t need to give credit card companies a justification of where you’ll spend the money. Getting a credit card for your business also gives you a lot of flexibility with how you use it.
As a tip, you want to apply for a business credit card rather than a personal one. Business credit cards give you more to work with as a small business owner. The credit limits are higher on a business credit card, and it offers fewer limitations.
Personal credit cards offer rewards to consumers. The rewards for business credit cards fit businesses’ spending categories. You get rewards for computer hardware, phone services, office supplies, and more.
Note that getting a credit card is easy, but it’s also risky. It best suits startup owners who don’t need too much capital funding and pay on time. If you apply for a credit card, shop around until you find one that has offers and limits that best suit your needs.
You may have heard of platforms like Kickstarter or Indigogo. If you haven’t, these are platforms that give startups and small businesses a new funding option. Crowdfunding lets you get help from supporters who want to see your idea grow.
The idea behind crowdfunding is to collect small contributions from many investors. You put up your product pitch and set a fundraising goal. Some crowdfunding sites use tiered rewards while others only use donations for equity.
Often, small business owners with innovative ideas for products use crowdfunding. You can also pitch a well-planned and innovative service or business idea.
However, note that crowdfunding is time-consuming. It’ll also take effort from your part to show all the backers the progress you’ve made with your product or idea. Also, note that the site will take a percentage of the collected money.
3. Business Loans
If you’re not very good with marketing or you don’t have a good network to back up your startup, try getting a business loan. Business loans are the traditional small business source of funding.
However, not every application for business loans gets approval. Did you know that you’re likely to get a small bank to approve a loan request? Small banks approved 48.7% of loan requests while only 23% get approved by big banks.
When you apply for a business loan, you’ll have to meet the bank’s requirements.
The bank will first check your credit score. Next, they’ll look at your debt-to-income ratio. If your credit score, cash flow, and income are all high, you’ve ticked down two major requirements already.
Next, they’ll look at how old your business it. It’s best to apply when you have a small business that’s at least two years old. Other things they’ll check include current debt, collateral, and the industry you’re in.
4. Personal Loans
What if you have a bad credit score or your business is too young to get approved for a business loan? What if you don’t meet the other requirements to get a business loan? If you can’t get a business loan approved, the next small business funding options are personal loans.
Some lenders of personal loans don’t have to check your credit score to lend money. They’ll still look at your repayment history and current salary/income. Others will check credit scores but will allow those with poor scores to get approvals anyway.
Online loans will work as well as traditional bank loans, too. Short term loans suit business owners who expect a quick return on investment. Click the link if you want to read more about short term loans online.
5. Angel Investors
Do you believe that your dream business will succeed if given the chance to launch? Can you defend your business plan well? Are you good at convincing people to invest in your small business?
If that’s the case, you want an angel investor backing you up. An angel investor is a high-net-worth individual who will help finance your business. However, in return, your angel investor will get a percentage of shares in your company.
It’s a risk to give up equity to someone you don’t know. However, it’s better than seeing your business spiral and go to the dumps. Thus, you want to build a case on why an angel investor must finance your business and convince them.
Note that you must be meticulous when trusting an angel investor. They must be an accredited investor, which you can find on Shark Tank or angel investing clubs.
The last financing options for small business are grants. Grants will give you free money, which is the best way to add to your business capital and launch your startup. However, you must know that very few people get grants, and it takes a while to get one.
When you apply for a business grant, you undergo a lot of detailed application processes. That includes going on interviews, making videos, writing essays, and more.
It’s easy to find grants for all kinds of businesses. If you belong in a specific group, you can apply for a grant in it. For example, there are grants exclusive to minority-owned or veteran-owned businesses only.
Start Now With These Small Business Funding Options
Remember that these options mustn’t get used as a permanent source of funding. They can help you when business is slow or sales decrease. However, you must always find stable and sustainable ways to boost business.
Now you know various small business funding options available to you. We hope you picked up something useful in this list. If you want to learn more about business funding, check out our other guides.