It’s no secret that many businesses out there need money to start. To run a small business smoothly, there should be enough capital to help gain some momentum in the Market. There are many different risks and obstacles that come up while expanding and investing in a business.
But the big question is, what options are out there? We have you covered! Here are several funding options every small business owner should be aware of.
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#1 Angel Investors
Angel investors are individuals with high net worths who actively invest in various businesses. Before approaching an angel investor, you’ll want to be sure that you have all of your ducks in a row before you speak with them. By having everything together, you will ensure that these investors see how serious you are about your business and that your business is a worthy investment for them to make.
#2 Venture Capital
Venture Capital is a type of private equity funding intended to fund small businesses and startups. This funding usually comes from wealthy investors, investment banks, and financial institutions. You don’t necessarily have to pay these investors back, but they expect to see ROI.
Get a financial boost to your small business with Crowdfunding platforms like Indiego, Kickstarter, or GoFundMe. These platforms allow you to pool small investments from various investors instead of seeking funding from a single, big investor. You can also get rewards for reciprocating investments. Before trusting any crowdfunding platform, do proper research before making a final decision. Also, don’t forget to read the fine print as some platforms have processing fees and other important information you should be aware of.
#4 Bank Loans
Most banks also offer loans to small businesses. They can be short or long-term, depending on your business needs. It is one of the most common options. However, getting a bank loan is a bit of a time-consuming process. Firstly, the banks will want to listen to your business ideas, plans, and financial forecast before approval. Before offering a loan, a credit check will also be required from most banks, so try to make sure your credit is up to par.
#5 Peer-to-peer or marketplace lending
Another debt financing option is peer-to-peer lending. It allows businesses to lend money from other companies and peers within your business space. Also, there is no middleman to worry about or answer to. There are some downsides, though – it can take a more extended amount of time to find the right partner, and the risk is also higher. Some popular P2P lending sites include Funding Circle, Prosper, and LendingClub.
#6 Credit Cards
Another option for funding is credit cards. Credit cards can also boost the cash flow of businesses by offering cashback, rewards, discounts, and more. However, you have to remember to pay your credit card balances to avoid paying extra fees. Also, keep in mind that your credit card limits more than likely won’t be as high as the amount of a loan you could get from a bank or the amount of funding you could get from an investor.
Funding a business with your own money and resources is called bootstrapping. Bootstrapping includes using saving accounts for self-funding, financial assistance from friends and family, and more to get started. The bright side of bootstrapping is that you have complete control over your business and how the money is handled, but the dark side is all risk taken by yourself. Avoid spending more than you can afford, and consider speaking with a financial advisor before choosing this option.
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Starting a business is a big deal and making sure that you can properly fund it is important. You can choose from any of the options above to get your business off the ground, but make sure you have a business plan and a clear vision of how you want your business to grow.