Starting a new business can be one of the most exciting events in your life. It could be the culmination of a lifelong dream of being your own boss or the realization of an innovative new idea. Whatever your new business may be, you will need to secure funding in order to get it off the ground, and this can be a challenging proposition. However, there are many options available for funding your startup, and with the variety of possibilities out there, there is sure to be the right match for you.
Similarly, there are several options available for those with existing businesses who need additional funding to take things to the next level. Whether you have hit a down period in your revenue stream or you need access to new funds in order to take advantage of the opportunity for growth, lenders are willing to help entrepreneurs who need additional capital. This guide will go over a few of the best options for funding your new startup and some choices for funding existing small businesses.
1. Personal Funding
If you are just starting out, you may consider using your own savings as the capital to start your business. While this option means you will be the sole owner of your company and in debt to no one, you should be careful mixing your personal and business finance. No matter how much faith you have in your new startup, unexpected issues are sure to arise, and most new businesses unfortunately fail.
If your business is already established and proven to be profitable, the risks of investing personal money may not be as great. Using your own funds for new investments, equipment, staff or growth will mean that you do not incur additional business debt, but it has some obvious downsides.
2. Relationship Investors
Another option would be secure funding from family or friends who could be investors and equity owners in your new business. The quality of this method depends solely on your individual situation, and you should use your best judgement when going into business with those close to you. Mixing personal relationships and business could have some serious drawbacks if things do not go as expected.
3. Bank Loan
Although the business world is constantly changing, the bank is still the first place that potential business owners will go to when they need to secure funding. Unfortunately, the vast majority of applicants are turned down when trying to secure funding for a startup. Those with established, profitable businesses will have better luck gaining a bank loan, and this is a safe, proven way of retaining additional capital.
4. Online Lenders
For those who do not meet the strict qualifications of a bank loan, there are many online lenders that provide an alternative source of funds with less stringent requirements. This is generally a faster way of gaining funds, and those who meet the requirements can get a loan within a few days. There is a wide variety of potential lenders for startups and established companies that will help match entrepreneurs with the right funding source.
5. Crowdfunding
For new companies, crowdfunding is an innovative and revolutionary way to gain funding. You put together a pitch, post it on a crowdfunding site like GoFundMe, Kickstarter, Fundable or other platform and let investors come to you.
6. Business Credit
A great option for established businesses who occasionally need additional funds, a business line of credit provides a pool of money that is available when needed. When expenses arise, you can use the funds as you see fit and pay it back on a structured repayment plan. A business credit card can also be used, but these should be used responsibly and only when needed.
Other options like venture capitalists and angel investors exist for those who need to fund their new business. Those who are in business currently could seek alternatives like factoring or inventory loans. If you need the money, and your business plan is solid, the funds can be made available.
