The 3 Best Small Business Funding Options
The first major challenge a small business faces is securing capital. Whether you are looking to launch a new company or expand your current operations, loans are often hard to get even if you have good credit. With that in mind, there are other funding sources that can help you get your business to where it needs to go.
Personal or business credit cards give you immediate access to cash. Whether you are just starting out or managing your company, the benefits of this funding option are plentiful. For example, the monthly payments are low as compared to conventional loans. You are better able to manage cash flow and track expenses. In addition, you can deal with financial emergencies much faster. The downside of credit card usage, especially for a new small business, is that interest rates and other costs mount up quickly when you don’t have the money to pay off the balance in a timely manner. This often has a negative effect on your credit rating.
It isn’t easy for a small business to obtain or qualify for a bank loan. The approval ratings are extremely low and the application process is quite lengthy. When you need money quickly, consider an online financial service. These lenders specialize in short-term funding solutions. The application process only takes an hour. After that, you will receive notice of a loan approval or rejection within a matter of days. The biggest disadvantage is that the interest rates are very high. It is not unusual for the annual percentage rate (APR) to start in the low teens and skyrocket towards 100 to 200 percent.
Family and Friends
The people closest to you know you the best and believe in your vision. The best approach here is to request initial funding for the smaller things your company needs, such as office supplies, building a website, office furniture or computer equipment. Keep in mind that mixing money with personal relationships is a delicate situation. So, it is important that you maintain open communication with everyone by keeping them informed about the status of the business. For added insurance, seek legal advice on how to best handle this type of investment.
Small business owners and entrepreneurs at some point need financial partners to help them launch or grow their company. Although the traditional ways are viable under some circumstances, in many instances, it is best to think outside the box and tap into alternative funding sources.