Joanna Marie, Negosentro | One of the biggest stumbling blocks to any new business is funding. It doesn’t matter if your idea is a great one, one which can change the marketplace; there can still be enormous hurdles to those looking to get on the first steps to business ownership. It doesn’t mean that there are no other alternatives, but it does mean that you sometimes have to look in many places before you succeed. Here are some of the best places to look for your new business funding.
Factoring
This avenue of funding has not always enjoyed a great reputation, but with the current climate in the economy, more new businesses are considering this option. Factoring is a method where a company sells their receivables at a discount price to get cash up-front. Companies with bad credit are usually the ones that are forced to use this type of funding. It can also work out as an expensive way to get the funds you need as you have to pay a fee that is a percentage of the total amount.
Bank Loans
Getting a loan from the bank was always seen as a safe and reliable way to get funding for your company. However, because of the financial crisis, banks have now become a lot more cautious about where they lend their money. It makes going to the bank for your funding a lot less appealing than some of the other options. That said, some banks have been trying to make more money available to small businesses, so it is worth giving it a try. To make your best case possible, you will need to have a detailed business plan, and all possible scenarios worked out before you go. The bank will need to see that your business has potential and can make money.
Credit Cards
Of all the options available to you, credit cards are the riskiest. If you are lucky enough to have a credit card with a limit that allows you to fund your small business, then you might think it’s the obvious choice. However, there are hazards which can make using a credit card incredibly unattractive. For example, if you decided to fund your business using your credit card, but your company wasn’t making enough money, then you would need a way to pay your credit card back with interest. If you couldn’t, then this can have serious implications for your credit score. If you want to see if you can apply for a credit card to help you with your business, make sure to check each one for the best rates. You can compare them on sites like The Credit Review so you can make an informed choice.
Crowdfunding
When it comes to funding new ventures, nothing has taken off as well as crowdfunding. The idea is simple, you have an idea for a business venture or a new product, and you need a certain amount of money to make it happen. You can post your idea along with details of the business or how the product works; then you set your funding target. Many thousands of people regularly trawl through these sites looking at the new ventures, and if they see one they like, they will donate an amount to the fund. If a venture gets enough donations and reaches its target, then the business can start. In return for their funding, the company usually gives them an advanced product or perhaps shares in the company. It is a way of funding that has become popular in recent years and has allowed people who might not have got funding before, to go on and develop their products. The other good thing about crowdfunding is that you are also gauging the popularity of the product at the same time.
Angel Investors
Angel investors are a good way of getting the funding you need if your idea is sound and something you have a lot of passion for creating. These investors are in some ways like the bank in that they want to see good evidence of your commitment and the success of the company. You won’t get much help if you are trying to cash-in on the latest trends, but if you have a firm idea, they can be immensely helpful. By having an angel investor, you can not only have access to funds for your company, but you can also have experience on board. Investors are not for everyone, some don’t like to give part of their company to someone else, but if you need funding, then they can be a good option.
Friends and Family
Of all the options open to you, asking friends and family is probably the hardest personally. The relationship you have with them can make it hard to ask or accept their help, but it can also be a good option. Your friends and family know you as a person, and they will know how much work you have put into your new venture. It is this knowledge that can be an advantage and something that other types of funding cannot appreciate. There are some reasons to be cautious, you will need to make sure that you can repay the investment, or it can cause issues in the relationship. However, this relationship can also allow some flexibility that you wouldn’t get elsewhere.
Microloans
Microloans are usually used by companies that have a poor credit history or no collateral. They are small loans of between 500 to 35,000 dollars that are amounts banks often consider too small. The benefit to microloans is that their underwriting criteria is often more flexible than banks and their interest only slightly higher in general. These loans are a good idea if you are only seeking a small amount to get started with your business.
Starting a new business isn’t easy but finding the funding you need shouldn’t be a barrier to your success. With all these options, you have the chance to start the venture you have always wanted to do.
