Where can I get small business funding?

When you own a small business or are thinking about starting one, one of the things you need to do is establish funding. There are many different ways to obtain funding for your business, whether you need assistance to expand, you have suffered some losses or if you want to open a brand-new small business.

Borrowing money

Loans are a common way that people get the funding for their small business. If you have a strong credit score, you may be able to borrow money for the business from a traditional lending source, like a bank or other financial institution. 

The Small Business Association does not lend money directly to small businesses, but they do make money available to their partners, such as lenders, community development groups and micro-lending institutions. Most SBA loans are for established businesses, although they do have programs for new businesses as well.

Lines of credit and credit cards

If your business is established, you may be able to take out a line of credit. They work best for businesses that operate on a seasonal basis or that have unpredictable capital needs. The bank creates a line of credit that you can borrow as you need it for capital purchases or other funding needs. You only pay interest on the portion of the line of credit you borrow with the remainder available should you need it. 

Business credit cards work similar to lines of credit should you not need a large amount of funding. Usually, business credit cards have higher credit limits than a personal credit card and the interest rates are often lower. Some business credit cards offer specials such as “spend $15,000 and get $400 bonus cash back in the first three months.” This is a great way to get more funding for your business.

Small business grants

Grants are another option for business funding. Grants are very competitive, and completing the applications can take some time. Many require detailed financial information. You may need to fill out many applications in order to be successful. Grants are available from federal, state, and local governments as well as from non-profit organizations.

Equipment financing

When you need funding to purchase equipment, you may be able to simply finance the equipment. This provides a quick method to replace equipment that may not be working properly or to add new services to your company. There is also the option to lease equipment rather than purchase it. You don’t own the equipment; you simply pay to rent it for your use as you need it. You may be offered the option to buy the equipment after a set time period.

Invoice financing

For companies whose accounts receivable contains late payments from customers that are affecting your cash flow, invoice financing may be able to help. Also called accounts receivable financing, this type of funding allows you to borrow against your accounts receivable, usually up to 85 per cent, in order to deal with cash flow issues. There is usually a weekly percentage charged on the loan, which you pay off when your customer pays.

Friends and family

If you only need a small amount of money, you can reach out to friends and family for the cash. You can offer them the opportunity to invest in your business. It is important to offer them an investment agreement that will make them feel more comfortable about lending you the money. You may even be able to offer them equity or stock options in exchange for the funding.

No matter what type of funding you end up going with for your small business, if your first couple of attempts to find funding don’t work out, don’t give up. The right opportunity will arise, but you’ve got to keep looking and doing your research until it does.

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