If you have finally come up with an idea to start your business with or you are the owner of a startup that has been operating for a short time, you are probably wondering where you are going to secure financing from. Since your business is fresh off the ground, you may not be a good candidate for traditional sources of business capital. However, that doesn’t mean that you can’t still find the funding you need. There are many options available for new startup businesses. However, you may be at a crossroads trying to figure out which ones are best for your situation. Here are some ideas for you to consider to help you finance your business.
Crowdfunding is really popular. It enables entrepreneurs and individuals the opportunity to make their cause known to the public. Anyone who supports their ideas and believes in their efforts can contribute as much money as they want to help them to get those business ideas off the ground. While the idea of crowdfunding is immensely trendy, you have to keep in mind that you will be competing with thousands of entrepreneurs who have the same goals that you do. In order or you to make the crowdfunding platform a successful one for you, you’ll need put forth your best foot forward and have a carefully thought out and developed business plan.
Small Business Loans
If your credit profile and business plans are in great shape, and you meet other criteria, you may be able to apply for small business loans. It is important for you to realize that many lenders tend to view startups as risky ventures, so be prepared to hear a few no’s before you get a yes. You should also be prepared to apply with different lenders because not all lenders have the same requirements.
Credit Cards and Personal Savings
Depending on how great your need is for funding, you may have to finance your business for a short time on your own until your alternate funding options kick in. If you have credit cards and savings stashed away, you may need to dip into them occasionally. It is very important for you to be very careful about how you use your personal funds for your startup. Keep an accurate accounting of your transactions and seek out expert financial advice to avoid depleting your personal resources.
Friends and Family Involvement
Encourage your friends and family to support your business idea by contributing to it. While you are letting them know about your goals, make sure you provide them with a detailed accounting of your business plans and goals. Any funds you receive from your family and friends should be documented as promissory notes to prevent future disagreements and issues once your business is fully established and running.
Factoring Accounts Receivables
If your business has been up and running for a while, you may be able to take advantage of factoring accounts receivables. This financing option allows you to use your invoices to secure funding. Your invoices are sold to a third party and the money you receive can be used to meet your business’ financial needs.
Retirement savings and IRAs can be a great source of startup funding for some entrepreneurs. Even if you have amassed a substantial amount of savings in your own retirement accounts, the rules regarding retirement fund withdrawals are complex. Even though you may not be allowed to use your own retirement funds to fund your business, you can still ask your friends and others to dip into theirs to help you out.
Vendor Deferred Payments
Hiruy Amanuel of A.J. Ventures recommends for you to ask your vendors for assistance. Many vendors are willing to work with startups. You may be able to ask your vendors to extend financing to you if you need a little extra time to get your business affairs in order. This is a great option because it allows you to defer payment for any goods that you may have received from them by a month or two which gives you more time to pay.
Purchase Order Financing
Depending on the type of business you have, you may have trouble accepting large orders without the right amount of capital readily available. Fortunately, there are financial intuitions out there that you can use to secure purchase order financing. Once approved, the lender will advance you the funds you need right away so you can fulfill your outstanding orders to repay the loan.
No matter what kind of business you have, you must remain persistent if you intend to use outside funds to finance it. If you find that you keep getting rejected by traditional lenders, take a look at your credit history and make sure that it is accurate. Don’t forget to evaluate your business plan. Things like missing information, documents, and details can prematurely disqualify you from traditional sources of lending. Don’t forget that the government also offers funding for startups in the form of small business loans. By taking a diversified approach, you can find the funding you need.