Got a great idea? Awesome. Struggling in finding ways to fund your small business? We understand.
If your strengths include creating and growing your business, there’s no need to worry. As long as you have the ideas and the drive, we’ve got you covered.
Read on to learn about the many funding options that your small business may be eligible for, so you can get back to business.
Financing a Small Business
Every business owner aims to grow its business. This, however, can be a challenging task.
How will your business get the financing it needs? Every successful business depends on funding as it’s lifeblood, especially in the months before it begins to turn a profit.
So how do you find the necessary funds to allocate? Well, that’s why we’re here to help! Explore the following small business funding options and discover which ones may be best suited for your small business.
The 4 Categories of Small Business Funding Options
There are four major categories of small business funding options that may be available to you. Understanding these four categories will enable you to identify which funding options your business may be best suited for.
If more than one option sounds like it could be a fit, your business is sure to find the financing it needs.
Self-financing is the most desirable of the four funding categories. This financing option allows you to use a start-up investment to grow your business.
Because this financing option doesn’t utilize loans, you won’t have to worry about pesky profit sharing. Profit sharing is commonly associated with angel investors.
Angel investors may also request a leadership role in your company. If you aren’t interested in sharing some of the creative decision making with your investors, self-financing is likely the perfect option for you.
This, however, isn’t always easy. Self-financing may be easiest for those who have lots of liquid capital on hand, however, that isn’t always necessary. Self-financing simply means financing options that don’t require you to give away the owner’s equity or take on debt.
A personal loan would be another example of self-financing in practice.
Unlike self-financing, equity financing involves trading a piece of ownership. This piece of the pie is given in exchange for the capital needed to start the business.
In exchange for your owner’s equity, this financing option enables you to start your small business ownership journey free from debt.
Secured Business Loan and Collateral-Based Financing:
If the previous two financing options are both debt-free, this one is the exact opposite. Secured business loans and collateral based financing allows you to fund your business from outside sources.
This is considered debt-financing which typically requires collateral. Without collateral, you’re unlikely to receive a secured loan.
Collateral may include your different properties such as your house, business, or stock portfolio. These are used to lessen the risk on the part of the lending institution. For the person receiving the loan, however, the stakes are considered to be significantly higher.
If you really believe in your business, this may be a good option. The risk, however, is incredibly high for those who are just starting out. Losing your business and your home, for example, could be a crippling blow to your success early on.
Unsecured and Non-Collateral Loan Financing:
Unsecured loans don’t require the same level of collateral as secured loans. The main difference you’ll see in this financing option is that it doesn’t require you to secure that debt with collateral.
This type of loan financing doesn’t come along with the same personal risks, however, there is a catch. Because this small business funding option isn’t secured by collateral, this loan usually comes with a higher price.
You can expect to pay a higher interest rate than you would when compared with loans that require collateral.
More Options for Self-Financing
Oftentimes, small business owners will try to raise capital to fund their business on their own.
There are various ways that this process can be done. You may opt to use your personal savings or ask for funds from friends and family.
While this can be ideal for a start-up business, this can sometimes be difficult to achieve. Kickstarter and GoFundMe are two examples of crowdfunding options that can help you raise capital for your million dollar idea, without having to rely on angel investors or small business loans.
Running a small business oftentimes requires a high level of creativity. Are you ready to start brainstorming? Start off on the right foot by using your business know how to get as much debt-free money as you can before your launch.
Waitlists and pre-orders can also help you gauge your client response before investing your precious capital. Be smart and get creative. We believe in you!
Need a Small Business Loan?
If you need a small business loan to help get your business launched, we’re here to help. Whether you’re looking to take your business to the next level or just starting out, we’re here to help you find the best options available for your business.
Want to learn more about small business funding options? Visit our website or make an appointment to speak to one of our experts today.
When you’re starting a business, the last thing you’ll want to do is spend your days worrying about your debts. Call us today. We’ll help you decipher the fine print so you can sleep worry-free and get back to the important things.