Getting the right financing is one of the major challenges small business owners usually face. As financial institutions and banks finance the giant companies and businesses as they are safe investments, small businesses are unable to apply for business loans to meet their financial needs.
And it is also the fact that no business can grow without enough financing. Money makes a business run its operations effectively, but banks approve loan applications of businesses with a good operating and credit history.
However, there are some alternatives that don’t require any credit history or repute in the market to get funds for your small business.
Below are some smart ways you can get your hands on some startup capital to make your business venture a success.
Friends and Family Investors
Friends and family are one of the best and easiest ways to raise capital for your startup. You can ask your trusted friends or family members for short term loans either by offering interest rate or by selling them equity. Getting a loan from your friends or family help you keep the ownership and you need to pay the money back.
But selling equity (a part of your business) doesn’t require you to pay the owed money back. It is a common method of getting finances for your business but risky as well. However, you can make the transaction safe and secure by signing a loan agreement or something similar to that.
Using your own money is another best way to keep your small business operating efficiently. Self-funding is not realistic for most of business owners. But the majority of the startups use their personal funds to meet the financial needs of their businesses at the start.
Even if you don’t have some bucks in your savings account, you can sell your expensive car and buy a less expensive one to invest saved bucks in your business to make it grow. Some people also use their personal properties to get home equity or a line of credit for business capital.
As credit cards always help you make payments in your personal life, they can also be a smart way to finance your start-up. Most of the credit card companies offer higher limits at $20000 that can be great for your startup to stay on top of your financial needs.
Such credit cards can be one of the best and most convenient means of funding your small business venture. Hence, you should make credit card payments on time to earn better credit scores so you will be able to easily apply for a business loan in the future.
Most of the credit card providers also allow businesses to apply for interest free credit card to save business bucks while making payments even without paying a single penny as interest.
Tap Into Retirement Account
You can fund your startup by borrowing money from your assets. Yes, you can have a loan out of your retirement 401(k) plan to pay business overheads and expenditures.
If you successfully qualify, you will be able to fund your business out of your personal savings. As a result, investors may see your business as a worthwhile investment as you have a personal stake in the growth and success of your business.
Getting the attention of angel investors is another best way to raise funds for your new business. Angel investors are companies or individuals who are interested in your business and decide to give their money for your business to carry on things accordingly.
They usually lend you the money on easy terms or for the sake of promotion or royalty. You can find angel investor networks online to find individuals or businesses that take a special interest in your business and help you grow greater. Your friends or family could also be angel investors for you. So, share your business idea and goals with them too.
Apply for a Personal Loan
Getting a business loan approved can be tough when you are about to launch a startup business venture. Lack of credit history and business revenues are the top reasons. However, you can apply for a personal loan to meet the financial needs of your small business.
You can get a personal loan approved easily with good personal characteristics that later can be used for business purposes. Hence, you should read the terms and conditions carefully before applying and see if they allow the money to use for business funding.