Starting a small business is still very much the American dream for many people in the country. Whether you’re looking to increase your holdings as a small business owner or you simply want to get out of the rat race, starting your own enterprise, whether that’s with a new franchise or a brand new upstart, can be very exciting.
Taking care of the finances is one of the hardest parts of starting a new business, though. No matter how you choose to do it, you’re going to need to raise some money. Unless you’ve got a ton of cash under the mattress, that is.
Use this guide to learn more about the four top ways to finance your business. They may not all be right for you, but at least one should help you raise the capital you need to get your business off the ground.
Get a Bank Loan
Getting a bank loan is pretty much the standard way to start a business. Whether you’re trying to get into a bakery franchise or build a construction company from the ground up, a bank loan can help you do it.
Qualifying for a bank loan isn’t always particularly easy, though. In many cases, you may need a proven track record that shows you can run a business. When you’re just starting out, this can be somewhat difficult.
A high credit score and home ownership can help show that you’re responsible with your money. Going to the same loan that holds your mortgage can also be particularly beneficial since they have a financial history with you.
Try an SBA Loan
Securing a traditional bank loan can be difficult for a lot of new entrepreneurs starting a business for the first time. Lenders are a lot more hesitant after the financial crisis and crash that hit them so hard.
Getting a U.S. Small Business Administration loan isn’t always the easiest either. According to certain rules, you need to be turned down by a financial institution first. That’s why it’s important to apply for a bank loan as the first step toward funding your small business.
Your business will also need to meet certain criteria to qualify that can be a bit difficult to understand. The SBA also doesn’t provide loans directly, so you’ll need to apply with a financial company that handles the money for the SBA too.
Do your homework before you apply for an SBA loan.
Consider a Private Loan
The idea of getting a private loan can be a little scary for some people. Of course you don’t want to owe money to anybody you know, but the fact is that sometimes private loans offer the best terms and give you the greatest chance to succeed.
If you have friends or family members that commonly invest in upstart ventures, they’re the first people that you should turn to. Even if they can’t invest right now, they can give you some valuable advice about your business plan and how to improve it. They might even be able to point you toward investors that you wouldn’t have met otherwise.
When you go into a private loan situation, make sure you keep all of the paperwork straight just like you would with a bank, invoice factoring company or SBA loan. You don’t want contract issues or repayment terms to get in the way of family or friendship.
Finding investors for an upstart business can seem like a monumental task for many people. If you’ve never done it before, there might be a significant learning curve as well. That doesn’t mean that you can’t do it.
When you’re looking for investors, start with people you know, even if you know they can’t really invest in your company in any significant way. For many small business owners, finding a dozen smaller investors instead of one angel investor is often a lot more likely.
The people you know in the business world may also be able to point you toward investors who fund startup businesses. Leave no stone unturned, even if that means spending days on the phone and sending out e-mail like a mad man or woman.
Starting a business can be challenging, but it can be one of the most rewarding challenges of your life. Getting all of the money you need together shouldn’t be the thing that stops you from building the life you’ve always wanted.
Use these four methods to raise money, or even a combination of them, and you’ll have that business you’ve always dreamed of. It may take time, but it is well within your grasp if you’re smart, dedicated, and are ready to dive into the world of small business ownership with both feet.
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