By Andrea Laura
You have a brilliant idea which you want to launch in the market. But you face the major problem in your start-up plan…financial support. The first hurdle is to convince your creditor about your idea and borrow money to run your business.
Here are the 6 small business financing options that are good ways to start your journey.
Credit Cards or Alternate Lenders
Most of the small business owners nowadays are frequent credit users. They get financial help from their credit cards and grow the business. This way the economy has a lot of positive change due to the increased use of credit cards. It has supported almost 1.6 million jobs between 2003 and 2008. You will find 4 out of 5 people using credit cards for their small start-ups. On the other hand the alternate lenders are another excellent way to draw money to finance your business. It is offered by non-bank organizations and are specifically for the small business entrepreneurs. Where you have to wait for long enough and go through series of procedure to draw loans from traditional banks, these organizations approve your loan easily. Although the rate of interests are higher, but it involves less paperwork and are more flexible.
Microloans and Angel Investors
People who are not qualified for traditional bank loans and have not so perfect credit score can always look for micro loans. Entrepreneurs from all across the world are frequently turning towards micro loans as the crediting procedures are flexible. Whereas the angel investors are always a better option for the entrepreneurs as they provide money in exchange for equity. But there is one problem with angel investors. They are hard to find and moreover they might reject or accept your proposal after accessing your idea thoroughly.
Personal Savings or Short Term Loans
Many people prefer personal savings specially who do not qualify for credit cards or traditional bank loans or for micro loans too. If you have enough capital to invest in your own start-up then it is the best idea. This way you will not have to run for long procedures, formalities and rate of interest. In short you can work with your business in peace without the tension of repayment of a loan. Another option is ideal for many entrepreneurs and that is short term loans which you can get even without an excellent history. You get them easily within a day or two but there is higher risk of interest.
Family, Friends or Crowd
Many lucky entrepreneurs are there whose friends and family members are good enough to help them with enough cash flow so that their start-up continues. But it does not happen for others. If you are lucky enough then you will get investors from your family or friends. It has been seen that many times a great idea told to your uncle or elder cousin really helps. They do support you in times of need. Another reliable option is crowdfunding which is gaining popularity much these days. Through crowd funding small business owners can raise good amount of capital. The efforts of a large group of individuals are responsible to raise the fund. You can easily start a campaign only you have to remember two things. First your campaign must be realistic and second it needs proper marketing. Moreover you need to make the right pitch for your idea. The real trick is to attract the attention of the crowd to get the fund.
Small Business Administration or SBA loans guarantee low interest financial help for entrepreneurs which they can repay in flexible terms. Depending on your needs there are a number of separate types of loans and are for different age groups such as you will get loans for real estate, equipment, inventory and many others. SBA loans are very convenient and come with many advantages. From low rate of interest to flexible repayment terms SBA are the ideal choices for start-ups. The most benefit that comes with this type of loan option is the small business loan rates. You get loans on your hand without much tension for dealing with huge interests afterwards.
The amounts of money the retired persons save in their banks and roll over are sometimes the life saver when it comes to start some business. The rolled over money may give you your required fund to run your startup, but it involves risk. Say your business failed and you cash burnt, in that case you can never stand up again, since you have already used up your savings. Although many people use them, but they should be your last resort when all other doors closes. ROBs strategies are not strong as risks are more than benefits in this option.
Andrea Laura is a freelance writer and contributor to Home Business Magazine. Follow her on Google Plus.