Beyond Loans


Credit is essential for your business growth. It can help you manage seasonal cash flow, purchase equipment or inventory and expand for the future. But securing financing is one of the biggest challenges facing businesses today. That’s particularly true for start-ups with no credit history or track record of success.

So where exactly can a budding entrepreneur with an innovative business idea turn?

While credit markets are tight, it is still possible to obtain the financing your business needs. Just think outside the box and look at all your options—including the unconventional.

Look into Small Business Administration (SBA) Loans.

While credit markets are tight, it is still possible to obtain the financing your business needs. Just think outside the box and look at all your options—including the unconventional.The Small Business Administration (SBA) offers loan programs designed to help businesses without an established credit history. SBA loans are guaranteed by the Small Business Administration, which makes the loan less risky for a financial institution. It’s important to find a bank experienced in SBA lending; their loan officers can provide valuable advice and insights to evaluate your business plan and overcome potential barriers to qualification.

Tap your own funds.

If you have a solid idea, you should be willing to put some of your own money toward establishing your business. If you don’t have liquid funds, consider taking out a home equity line or loan which allows you to borrow against the investment you’ve already made. An equity line is a revolving line of credit that lets you borrow and repay funds over and over again.

You can also consider tapping your savings account or other investments.

Take on investors.

Another option for obtaining financing is to solicit potential investors. Many entrepreneurs have gotten businesses off the ground by asking friends and family members for seed money. Before doing so, draw up an agreement detailing the terms of the investment. The last thing you want to do is ruin a relationship.

Consider approaching other investors such as angel investors. An angel investor is a wealthy individual who provides capital to entrepreneurs. Typically, angel investors are willing to take on more risk and invest over a longer period of time than other types of investors.

You might also look into partnering with a venture capitalist or venture capital firm. They provide money in exchange for a stake of ownership in the company. In general, venture capitalists are looking for a faster return than angel investors. Also, keep in mind that when you go the venture capital route, you may sacrifice some independence–these types of investors are usually involved in the management decisions of your company.

If you’re seeking financing for your business, there are definitely options available. It’s critical to make sure you fully understand them all; and, before you approach anyone, make sure you have a solid business plan. It will be essential to convincing anyone that the rewards of financing your business are well worth the risk.

 

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