Clearing the startup financing obstacle is made more difficult by the simple fact that new entrepreneurs are frequently turned down for the business loans.
Traditional bank loans have been tough to secure and even though loans funded by Small Business Administration (SBA) are typically more accessible, it is getting more competitive. In addition, the growing number of the SBA loan applicants means that there’s a very good chance of this program reaching its limits.
Therefore, what can a would-be small business owner do so as to finance their startup? Do not worry because this article provides a variety of other options that can help you to fund your new venture.
Below is a comprehensive list of 14 options beyond bank loans that you can use to finance your startup including small business credit card.
1. Online lending
Recently, online lending services like Kabbage and OnDeck have become a popular alternative to the traditional business loans. These lenders have the added advantage of speed; applications take only up to one hour to complete. In addition, the accompanying fundscan and a final decision are normally issued within days. On the other hand, traditional loan process might take weeks or even months so as to complete.
2. Factoring/invoice advances
In case you do not want to take a loan then services such as invoice advancing and factoring might help ease growing pains for the small businesses. Through this process, service providers will front you the cash on invoices that have already been billed out. You will have to pay back once the client has settled its bill.
Eyal Shinar, the CEO of Fundbox (small business cash flow management firm) says that these advances allow firms to close the pay gap between the billed work and payments to contractees and suppliers.
3. Product presales
Selling your products or services before they launch it is an often-overlooked but highly effective way for raising the money needed to finance your business. For instance, entrepreneur Priska Diaz was able to raise up to $50,000 for her company with a presale of the Bare air-free baby bottles.
The money the Priska Diaz raised helped her pay for inventory. Furthermore, it helped Diaz to open some doors in retail and also learn more about her website’s visitors.
Even though Diaz benefited greatly from this means of financing, there are still some difficulties that you have to overcome. The biggest challenge in coordinating the inventory delivery times from the supplier so that you can start fulfilling orders.
4. Home equity loan
For the homeowners who have equity —the value of the home minus what you owe then home equity loans are great options for financing small businesses. These loans normally offer interest rates which are both flexible and lower as compared to the traditional commercial rates.
5. Selling assets
Sometimes, you might have a financing method and fail to even realize it at first. This was the case for Hamid Saify who managed to fund ChoicePunch, his opinion-sharing community by selling a car that he wanted to pass along to his kids.
Even though it was a tough decision, Hamid Saify made $30,000 from the sale of that car. In turn, that money went towards some important aspects of the fledgling startup.
6. Venture capitalists
For the small businesses that are beyond the startup phase and they already have revenues that are coming in then a venture capital investment might be appropriate. Fast-growing companies with an exit strategy in place can gain up millions of dollars that could be used to invest, network and also grow their company quickly.
If your business mainly focuses on a research-oriented or scientific field, grants from the government might be able to help fund the company. The SBA usually offers grants through the STTR (Small Business Technology Transfer) and SBIR (Small Business Innovation Research) programs.
Grant recipients have to meet federal research and development goals. They should also to have a higher potential for commercialization.
CALL TO ACTION
In conclusion, there are many ways to finance your startup business other than business credit cards rewards. Nevertheless, while the plethora of lending options might make it easier to get started, any responsible business owner should ask himself how much financial assistance he really needs.
Financing your star-up business is just one of the ways that you can use to become independent in life. Share these tips with your friend on your social media sites like Facebook and Instagram so as to enable them finance their own businesses as well.
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Last update on 2020-02-25 / Affiliate links / Images from Amazon Product Advertising API