When starting a new business, you probably need to apply for some business capital. The amount you need is, of course, depending on what kind of business you are starting. F ex starting a restaurant from scratch, will require some substantial capital from the start. You’ll need to invest in decoration and not to mention all the kitchen equipment.
However, if you are starting up a consultancy firm, then you perhaps only need capital to some office supplies and some money for acquiring customers and leads.
Here are some ideas on where to get hold of the capital you need to start up your business and some tips on how to acquire the business loans.
Crowdfunding
An increasingly popular way to raise business capital is through crowdfunding. The idea is to attract investors that are willing to loan you the money you need. For this service, you agree to give some of your shares in your company to the investor. They name it Equity funding or Equity Crowdfunding. You are setting the terms, but are negotiable. There are several Crowdfunding web sites on the internet which you can search. F ex Kickstarter and GoFundMe.
Credit Cards
This method is quite common, and most businesses applying with high approval rate (approx. 80%). The significant benefit is that the card solution is so versatile and easy to use. The application process usually is quite fast as well.
Scan the internet for the lowest interest rate and fees. There are a lot of sites that compare credit cards and cards with bonus schemes where you can earn airline miles or different cash backs.
Business credit cards can be a useful tool for startups to cover initial expenses, but they often come with high-interest rates. Here we have f ex American Express, Mastercard and Bank of America.
Microloans
Several companies in the market can provide microloans. These are loans that generally have a shorter term than conventional loans. As the name indicates, the loan sums are low. From as low as $500 up to $50,000 is a healthy range. The interest rate can vary a lot, so here it can pay off to scan the market thoroughly.
Many of the microloan companies can also provide additional services to your company, which can help your business to succeed. It can be everything from marketing support to business training.
SBA startup loans
The SBA doesn’t give out loans directly, but it does partner with lending companies that agree to abide by the SBA’s set guidelines. Reducing the risk for lenders using these guidelines, it becomes easier for individuals to qualify and get a startup loan.
In addition to competitive loan rates and lower down payment requirements, the SBA provides counseling and educational information that could help your business succeed.
To take advantage of this, you’ll need an accountant and an attorney to help you with the necessary paperwork to establish your corporation and then transfer the funds from your retirement account to your new company’s 401k. The money is then used to buy stock in the company. When the stock is sold, you’ll have the business capital you need to start your business.
Personal loans for business
You might not be aware that you can use a personal loan for business startups, but this is definitely an option. If you have a credit score of 580 or higher, the general qualification reported by Fundera, and you understand that the transaction directly affects your personal credit, you can apply. You’ll receive your funds in as little as 24 hours and be able to use the money as you see fit, such as to secure an office building or purchase a delivery truck. The downside is, personal loan makes it more difficult keeping business finances separate from personal finances. Personal loans are normally limited to around $40,000.
Business Grants
Grants are a preferred method of funding for startups because they don’t have to be paid back. Of course, some grants come with stipulations that business owners must agree to follow.
The grant could be designed to provide technology to get your business organized, or it might specify that the funds are for stocking the shelves of your store. The SBA does not offer grants for business startups, but there are other organizations that do.
Some government agencies, foundations, and corporations offer business grants to startups, which do not need to be repaid. However, the application process can be competitive and time-consuming.
Home equity loan
Entrepreneurs who don’t have a business history or a credit score in the excellent range, might find it easier to obtain a home equity loan rather than a small business or personal loan. There is a risk of losing your home if your business doesn’t earn enough to repay the home equity loan. But the benefits of going this route include lower interest rates and a quicker approval process.
Equipment Financing
Perhaps you have the money to pay rent and utilities for an office space. But you could use a little help with buying the appropriate equipment to make your business run smoothly. If this is the case, equipment financing is the way to go.
Companies like Wells Fargo and Direct Capital offer this type of loan. Depending on the financial institution, you might be able to borrow up to $250,000 for a period of up to six years and receive your money within 24 hours.
Venture Capital
Venture capitalists invest in high-growth startups that have the potential to become large businesses. In exchange for funding, they take an equity stake in the company and may be involved in strategic decisions.
Angel Investors
Angel investors are wealthy individuals who invest in startups in exchange for equity ownership. This option can be a good fit for startups that need a larger amount of business capital than other options can provide.
Rollover Business Startup
People who have $50,000 in their retirement funds can take advantage of a rollover for a business startup (ROBS). This option works well for business owners who wish to avoid debt when beginning their companies.
Friends and family
“Lender of Last resort,” who do you go to if everybody turned you down? Well, it could be your family or friends. If some relative or family member have some spare cash, they might give you a hand. But sometimes it can be hard to ask. Usually, the family will support you where others don’t. Remember that they should get some compensation, interest, even though they are family.
And remember to set up a repayment plan that is realistic, because when it comes to family, you should always pay back. Secure that everything correct, by writing a legal document stipulating the terms. Especially useful to have if something unexpected should happen.
