Financing options for your small business

The qualification requirements in most financing options are different, as well as the costs.


Starting your own business can be a daunting process, but also a rewarding one if you play your cards right. A good business plan is crucial for any business, but financing is an even more important element that your business would need to succeed.

However, financing a small business or startup can be difficult, especially if you have poor credit. Getting a loan approved at the bank would also require you to have solid Financial KPIs (key performance indicators).

Are you looking for financing? It’s time to read some of the best ways to fund your small business or startup. In today’s guide, we show you how to get financing to keep your business going and profitable for the foreseeable future.

bank loans

Bank loans are best for established businesses that have collateral and strong credit. Most small business owners will struggle to do this – however, traditional banks are often a good starting point for additional sources of capital.

these start-up loans are issued by banks – they usually have low interest rates and competitive terms, but are difficult to obtain. If you’re not sure if this is the right option for you, schedule a meeting with a consultant from your local bank to see what your best options may be.

SBA Loans

Next on the list are SBA loans, which are an ideal option for businesses that don’t meet the strict lending criteria of traditional banks. In other words, if you can’t negotiate a contract with a local bank, you can always opt for an SBA loan.

As for what an SBA loan is, there are several different types (SBA 7(a) loans, SBA 504 loans, microloans, etc.). A good credit rating, at least two years of activity and a solid annual income are often necessary to qualify. Most SBA loans are issued by banks, credit unions, and other financial institutions.

Online loans

Online loans are usually the last resort for many small businesses and budding entrepreneurs, but also a good option for people with weak personal credit or businesses that need instant access to financing. Be sure to understand that these loans can often have higher interest rates. Even so, the easy application process, quick approval, and electronic signatures put them among the most popular financing options for small businesses today.

Online lenders offer quick cash, as well as a number of financing options for small businesses (term loans, lines of credit, invoice financing). The cost of borrowing is higher – some annual percentage rates can reach percentages as high as 100%.

Small Business Grants

Next on the list of funding options for small businesses are small business grants. It is a good way for business owners to grow without worrying about repaying the funds. Typically, these are offered by non-profit organizations, government agencies, or companies. They can be a great funding option for startups and businesses that cannot qualify for traditional debt financing.

The only downside is that everyone wants them – and it usually takes a lot of work to find and apply for small business grants. However, applying for multiple grants could pay off in the long run.

Financing of credit unions

This type of financing is not very common or popular among small business owners, but is suitable for members who like a personal touch. Credit unions offer great rates and SBA-backed loans. The number of credit unions has also grown over the years, and products like these can include lines of credit, traditional term loans, and business loans.

Although you probably have to be a member to qualify for funding, the nature of credit unions binds them to a community. If you are a local business, you could definitely benefit from their personal touch and get your name out there in your local community.

Crowdfunding

Woman using laptop to view crowdfunding site; image by Rawpixel, via Unsplash.com.

Last on our list of financing options for small businesses is crowdfunding. You’ve probably come across websites like Kickstarter and Indiegogo, where people create and launch campaigns, relying on anonymous investors to help get an idea or business off the ground. In return for (financial) support, these small business or startup owners reward them with perks or equity.

The popularity of crowdfunding has grown over the past couple of years, which has also given rise to a new model called equity crowdfunding – where investors acquire a stake in the company in exchange for money.

Summary

As you can see from the list above, finding financing for small businesses can be confusing. The good thing, however, is that there are plenty to choose from when it comes to financing options. The qualification requirements in most financing options are different, as well as the costs. Therefore, you need to pay attention to details before making the right choice for your business.

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