Finding the funding to start their businesses is generally one of the major problems that small business owners experience. For majority of small business owners, finding the right type of funding can be difficult and very irritating. Remember the fact that finding the right type of funding to start your small business is a game of tolerance. You need to work hard to overcome potential refusal if you want to succeed.
Here are some of the funding sources for small business owners;
- Small Business Lenders
There are many small business lenders online who are willing to lend. You can search for online lenders on Google. Most online lenders will want the business loan to be secured by way of assets. The rates for the secured loans are somewhat higher. Some lenders offer unsecured loans that did not require you to place your assets as collateral for the amount of loan. Therefore, businesses that have assets and resources can place them as collateral in order to acquire secured business loans and businesses who don’t have resources to place, can apply for an unsecured business loans.
- Lines of Credit and Credit Cards
If your small business is in fairly good financial position, you can get a credit card from your local bank. Credit cards are relatively easy to acquire, although the rates related to them are somewhat higher. You could also be eligible for a business line of credit. Similar to credit cards, funding through line of credit become available to borrow again when you pay them. And the interest rates on lines of credit are typically lower as compared to credit cards. A line of credit is linked with your business bank account, making it expedient for you to get instant access to your required funding.
- Personal Funds
It is not unusual for small business owners to finance business with personal funds, particularly if a business is a sole proprietorship that is linked financially to its owner’s property. Keep record of where and how much you’re setting into your small business, and examine your assets regularly about how much you’re eager to risk.
- Crowd Funding
In case your small business has a dedicated following, you can consider crowd funding. You can launch a crowdfunding campaign. There are lots of crowdfunding platforms that can help you set the terms and rewards. In case you launch a kickstarter campaign, you will not get any of the money pledged unless you get your funding objective.
- Family and Friends
One common way to finance a small business is to ask your family and friends for funding. However this is the most risky way of funding and due to this fact, most of the financial experts advised against it. One of the major problem in this type of funding is that if the things go wrong, your relationships might be affected. And in startup business, everyone knows that every time the situations are not in your favor. Therefore, if you opt for this type of funding, you need to be very careful about these problems.
- Customers and Suppliers
Customers and suppliers are also a great source of small business funding. Your customers that you have a good relationship with can also finance your small business by prepaying for orders or by giving you an advance. You can use these funds to help manage their transactions. This type of funding is not easy to acquire when you are new and don’t have any connections in the market. Suppliers are also a great source of getting funding for your business. This type of funding is just like getting interest free credit for a month or more.
- Small Business Administration (SBA)
Another great source of business funding is the Small Business Administration (SBA). The SBA has a unique funding program that gives Microloans to small business owners. Microloans can reach $50,000 and are way easier to acquire as compared to traditional type of funding. Additionally they come with business education and training that can be very useful for startup business owners. The SBA also works with banks to offer 7(a) loans. These SBA 7(a) loans have higher amounts and stringent underwriting criteria.
- Small Business Grants
If you’re looking for something similar to a loan, but you are hoping not to pay it back, that’s not how grants work. Grants are especially intended to support small business growth or assist the public good. This type of funding is especially meant for research work, medical treatment issues, or for environmental issues.
- Invoice Factoring Firms
There are many small businesses that experience some financial problems because their commercial clients ask for payment terms. You need to offer them 30 to 60 days to pay an invoice. Otherwise, you can lose the client. The problem here is that many small businesses cannot have enough money to wait up to two months to get paid. Factoring the invoices can help you to fix your cash flow issues and get paid quickly.
Invoice factoring helps you to finance slow-paying invoices that offer you quick working capital. You can use this type of funding to run your business effectively and grow your business.
- Leasing Firms
There are some leasing firms that offering leasing on equipment. If your business need equipment to grow its productivity, then leasing is the best funding program for you. On the end of the leasing term, you can purchase the equipment.