Believe it or not, this is the most common way to finance a business. Raising funds from your friends and family can be more challenging than one can imagine. It has always been hard for people to separate business from your love ones. So you really have to plan well on how to make the divide between personal relationships from your business partnerships. To avoid conflicts that can affect your relationship with a family member or friend, supply them with information about your business plans, give them a projection of how the business can grow financially.
Dealing with them the professional way can increase the likelihood of them investing on your business. Show them contracts that can establish a good business relationship. You should also state clearly the arrangement of the overall business structure and their share in the business, and of how they can benefit from the business if it prospers. Are you offering them equity? Or are you just loaning from them? Present an effective business plan to make your intentions more credible and plausible.
Another way on how to find financing is by looking for an “Angel Investor” or an informal investor. Investors are open to entrepreneurs with great ideas about a project. You can approach them by giving them a “pitch” about your business proposal. When making a pitch, make sure to be concise and clear with your intention. It helps to have a good strategy when dealing with them. However, due to the economic chaos over the past years, the competition to get an angel investor has become stiffer and trickier than before. That is why you really have to be good in strategizing when doing a business proposal.
If you can’t secure a loan through bank or some government institution, you can try microloan. Microloans are for small businesses that need funding from $500-$35,000. Even popular sites like this started this way. Microlenders work differently from banks. They more accessible and they demand lesser documentations. The downside is they offer higher interest rates.
SBA loan or Small Business Administration loan is the most affordable financing loan for start-up business people. An SBA is a type of loan from a bank or a commercial loaning foundation that helps guarantee about 80% of the loan principle.
SBA loan has a list of qualifications. For you to be eligible, you have to be the type of business person who cannot finance your venture on your own. In other words, you have to prove that you really need the money. SBA loan can be your last resort if ever you get turned down by your principal bank or other financial institutions to which you are enrolled in. SBA offers loans limited only to certain small businesses and acquiring a loan from then can very stringent. Thus, you will have to meet the government’s description of a small business in your industry of choice. In addition, SBA has other particular criteria to approve on your type of loan. Once it gets approved, you will have to apply for a commercial financing from a financial company that is affiliated with SBA since SBA does not provide the loans directly.
Crowd funding, also known as crowd financing or equity crowd funding, is form of collective funding effort made by a person to collect money to fund a specific cause. Over the years, crowd funding has been used by different people to get support for non-profit organizations. It has also been used to fund varieties of activities such as relief programs, documentaries, science or technological research etc. The advantage of doing crowd funding is that it very accessible and can be done through the internet using websites like Kickstarter. Through crowd funding websites, people will be able pledge for your project. This type financing is more suited for artists or something that has a cause. Nevertheless, you can still try. And best of all, once you do obtain that funding, you can promote your site using services like Zazzle.com and Lovepromos.com.
If you are not into people pledging for your business, why not try to pledge for your future earnings? Investment agreement with social-capital funding organizations like Thrust Fund offers personal investment contracts to young entrepreneurs in exchange of a percentage of their future earnings. Recently, one of my local friends, a Wedding photographer in Leeds, signed a contract that acknowledges his will to swap 5% of his future lifetime earnings in exchange of $800,000. Although these may look tempting, you still have to beware of the legality of the contracts of such funding organizations.
Credit cards are the easiest sources for money. Cash advances are offered by credit card companies. So lending money from them can be a good start for you. Although it can be risky, all it really takes when dealing with credit cards is by paying at least a portion of bill or the minimum every month. The interests of credit cards can inflate like crazy so you really have to use them occasionally just when you really need them.
If you are unemployed or retired and plan to start up a business, the funds that have accumulated in your 401(k) or retirement savings account can be a good source in financing your business. You can even look into bad credit loans online if you’re having trouble getting a loan through traditional sources. However, you will have to check your eligibility and the legality of tapping into your retirement pay. There are provisions that allow you to tap into your retirement funds but the legal terms are quite complex. So if you are tempted to source funds from your retirement savings research very well on the steps on how you can get money from it without getting a penalty.
Financing one’s business has always been a big challenge for entrepreneurs. Whether it is for a start-up business like Our Greenville or for the expansion of your business venture, looking for money to keep your business running can be challenging in any type of economic climate. Nevertheless, being strategic in searching for a financer can be easier if you know where and how to find them. Although lending money through banks have gone tighter today, there are still some banks like J.P. Morgan Chase that has reserved financial assistance for small business lending. So before the other options below, try loaning from a bank.