How to Get Funding for Your Business Without All the Headaches

How to Get Funding for Your Business Without All the Headaches
Ronis Gracie
on March 24, 2020
Read in 6 min

Starting and maintaining a small business is a challenge that requires the confluence of many elements:

An idea, a plan, the right people and tools and– perhaps most essential– the capital to accomplish it all!

It is this last factor that can be extremely daunting to budding entrepreneurs.

There’s no doubt about it, capital is the lifeblood of your business. Without it, you won’t have the resources you need to find a location, gather inventory, hire staff, purchase office equipment, and all the other things that keep your business in operation.

As indispensable as money is, it is one of the most difficult commodities to come by. In fact, it is the stumbling block that brings many would-be entrepreneurs to their knees and causes them to give up their business dreams. Don’t let yourself fall prey to pessimism.

Take advantage of some of these financial resources that will help to vitalize, strengthen and protect your burgeoning business for years to come.

1. AngelList

Imagine that you could go to a website where there is a pool of investors waiting to hear all about your business and perhaps give you the funding you need to get started, hire new employees or embark on a renovation project. That is exactly what AngelList does. Wouldn’t it be wonderful to find an angel investor of your own?

2. LendGenius.com

Have you decided to seek a loan instead of searching for investors? If so, look no further than LendGenius.com for all the information you could ever possibly need about the various types of business loans that are available to you. Take a look and find out which one best suits your company’s unique needs.

3. Kickstarter

This crowdsourcing platform gives you the opportunity to pitch your business idea online and request funding to help you get going. When micro-donors elect to contribute specific amounts into your account, you can reward them with gifts or product samples of your choice. Only if your idea is fully funded will the site take a small percentage of the money you make.

4. Product Presales

If you have a strong social media presence, leverage it to your advantage. Allow your preferred customers to buy your products before they are available to the mainstream market. This can create an underground buzz that will help your product to have a successful launch.

5. Lend Money to your Own Business

If you have two businesses going at once, or you have access to extra personal funds, you might consider borrowing from the assets of one to fund another. This is perfectly legal and much easier than borrowing from a bank. Just be sure that you keep your bookkeeping meticulous because there can be complex tax implications for this solution.

6. Sell Some of Your Assets

It may not be easy on an emotional level, but you probably have sources of funding right under your nose (as long as you are willing to part with them). Do you collect valuable coins or watches? Do you have an extra car or property that you could sell? The biggest advantage of this strategy is that you will have no hidden charges and no one to repay.

7. Small Business Administration (SBA) loans

The Small Business Administration (SBA) offers incentives to banks and other lenders that encourage them to provide small business loans to get businesses started and to help them with ongoing needs.

Regardless of what lending institution you decide upon, be prepared to furnish a significant amount of documentation with these types of loans.

In the end, they are often worth the trouble, since their interest rates are generally more manageable.

When tax time rolls around, the U.S. government is probably not at the top of your list of favorites. However, it certainly can be an ally when it comes to the Small Business Administration (SBA). The SBA is an independent federal agency whose mission is to promote the success of small businesses in order to strengthen the country’s economy.

To that end, the SBA offers generous incentives to lenders to provide several different types of loans to businesses of all sizes. Although you are required to provide extensive documentation and the application process can be lengthy, modest down payments and low-interest rates often make these loans one of your best bets.

8. Traditional Term Loans

When you think of borrowing money, a term loan is probably what first pops into your mind: You borrow a fixed amount of money over a set period of time at a particular interest rate. Plan on being asked to pledge collateral with this type of loan, and expect to have your credit scrupulously checked.

Because rates are fixed and payments are predictable, you will know exactly what you are dealing with and can adjust your business accordingly. During the course of your loan, timely payments will boost your credit score, thereby making it easier to borrow money in the future.

9. Merchant Cash Advance Loans

If you need cash fast and have a reasonable amount of daily credit card transactions, this type of loan may be just right for you. In one to two days, you can receive a merchant cash advance from your lender. Your payments on the loan will be deducted from your daily credit card sales at a fixed percentage.

Therefore, the more transactions you have each day, the faster the loan will be resolved. If you are just starting out or your credit is sketchy, these shorter-term loans can be a workable solution. Just be aware that the longer they last, the higher your APR can become.

10. Short Term Business Loans

Just as in a traditional business loan, you borrow a set amount of money over a specific time period at a fixed interest rate. The difference is that short-term business loans involve lesser amounts of money and run for a much briefer period of time, usually only three to 18 months.

You generally make your payments on a daily basis, not monthly as is the case with traditional term loans. Although interest rates are higher, the brevity of the loan enables you to clear the debt quickly.

11. Line of Credit Business Loans

Think of this type of loan as similar to having a credit card for your business. You don’t incur any charges until you use cash from the loan, and the lender gives you a maximum amount that you are not allowed to exceed. Approval times are quick, and you only are charged interest on monies that you are using.

Unless inherit a fortune or have friends in high places, it’s inevitable that you will need funds for your business eventually. Before you jump into a scheme to raise capital, do your homework as well as some soul-searching about your business and your priorities. The options available to you are varied and the opportunities abound, as long as you follow your instincts.

12. Bank Loans

Perhaps the most traditional of your options, bank loans have some advantages.

They can cover short- or long-term needs and will help you to pay for whatever you require without restrictions.

However, you usually need to provide assurance of repayment by furnishing them with a personal guarantee such as a mortgage.

With banks, you can pay off the loan early if you have a sudden cash windfall, which could save you on interest fees.

13. Tax Increment Financing

If you are a real estate developer, this money-making vehicle might work very well for you.

It depends on what state you live in, but you might get anywhere from 20 to 30 percent of the total cost of the project.

Furthermore, you might even be allowed to borrow against the subsidized value.

If the terms for these loans in your area are not as favorable as you would like, consider your neighboring states.

Contemplate making a business-favoring move if your options are significantly better.

14. Friends and Family

Although the thought of borrowing from your in-laws or other friends and relatives might make you squeamish, at least weigh the pros and cons.

If you can find someone in your circle who is willing to take a risk on your company at terms you are genuinely happy with, both of you might benefit in the long run.

15. The IRS

Of course, the IRS does not offer loans, but that doesn’t mean you can’t get money legally via your tax returns.

Deduct any and all expenses you can. A

s a business owner, investing in a good accountant could be one of the best financial decisions you ever make.

Use part of your profits to grow your business instead of having them eaten up in taxes.

Whether you borrow from your Aunt Tilly, secure bank, or small business loans, the need for short-term and long-term cash is a given.

Once your business begins to make a profit, don’t overlook the importance of putting some of those funds aside as a cushion for the next rainy day that is sure to come.

Being flexible and remaining prepared for any eventuality are two of the most enduring qualities of a successful entrepreneur.

Make striving for them a part of your goals and you will have a far greater chance of achieving your business dreams.

 

Ronis Gracie Finance Journalist

A serial entrepreneur experienced with building several small companies from the ground up and consulting for many others, Ronis understands the finer points of small business financing. He’s passionate about small business & is committed to simplifying small business lending for others.

Lendio
Headway Capital

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Late Payments Hurt Your Credit Score

Please be aware that missing a payment or making a late payment can negatively impact your credit score. To protect yourself and your credit history, make sure you only accept loan terms that you can afford to repay. If you cannot make a payment on time, you should contact your lenders and lending partners immediately and discuss how to handle late payments.