Popular Financing Options for Startups

The concept of starting a personal business has become very popular in recent years. Many people start with a simple, yet creative idea along with a few social media platforms, and before you know it, their success makes them move their business to the real world.

Popular Financing Options for Startups

It might sound easy, but starting a business takes a lot of effort, hard work, and patience, not to mention money! That’s right, start-up businesses need sufficient capital to efficiently launch and enhance sales. Here are some popular financing options if you have your own start-up.

Family & Friends

One of the most popular options for aspiring business owners is to turn to their family or friends for money which is known as love money. There is no easier way of funding than getting the necessary money you need from a friend or family member. So if you have people in your social circle with a high net worth, pitch your startup idea to them and ask them to invest in your dreams. If you think it’s a bad idea to mix family with business, treat it as you would with any investor and put everything in writing by getting a legal professional to draw up a document stating the loan amount and terms.

Invoice Financing

This method of financing refers to loans that are based on your accounts receivable. Whenever you sell your product or service and draw up a bill for your customer. This is a popular option for newer businesses with good revenue predictions, but the business should be without two years of business records. Some lenders might require you to make monthly payments regardless of generating sales or not, It’s advisable that you use this option only if you sell to commercial and government clients that have good credit. 

Microloans

This option is specially structured to cater to small businesses seeking funding. These loans come from private companies and nonprofits that can offer up to $50,000. The eligibility criteria are more flexible than that of a bank and some lenders even offer business owners knowledge and training to help them succeed. In your extensive research to get matched with small business loan options, you’ll find this option to be one of the most ideal options for startups. While credit profile still matters, microloan lenders don’t consider it as crucial.

Small Business Loans

The old-fashioned way of getting a small business loan from the bank is still thriving. They are usually based over a predetermined period of time and set different interest rates. Most banks would take any kind of security like assets equity or an amount of money set aside. Unsecured loans are also available, but you might be required to provide a personal guarantee whereas the others will not require any security. 

Peer-To-Peer Lending

Also known as marketplace lending, social lending, and crowdlending, peer-to-peer lending (P2P) combines crowdfunding with traditional lending options. It consists of using certain platforms to connect investors with startups.  The biggest advantage of this type of financing option is that the application process is online and getting approved and receiving the funds is much faster than traditional options.

Personal Loans

These types of loans are not as big as other options in this list. However, they should be enough to cover miscellaneous fees and other emergency issues surrounding your business. You can get these loans from banks and other private lenders. Some of these loan institutions provide bond loans to pay off the required upfront fees of your commercial rent. Also, many of these won’t conduct a worrisome credit check.

You may Also Like :  What to Do If Your Social Security Has Been Compromised

Credit Cards

Many credit card issuers now have an option made especially for future business owners. There are small business credit cards that have limits up to $50,000. This is the most convenient financing option if you are still not generating revenue or don’t want to let another party into your business as an investor. However, the downside of this option is, of course, the high-interest rate, which is why it’s wise to not let it pile up and pay it back as soon as you can. 

Take your time reading about each of these options to make sure it’s suitable for your financial circumstances and type of business. The whole process of trying to find an investor or entity that believes in you enough to provide funding can be difficult. However, if you believe in your business idea and its potential for success, it will be easier to convince others for the same.