When it comes to funding your startup, you may not know exactly where to start. While you could certainly seek out a small business loan, microloan or other program designed to get you the capital you need, there are other viable funding alternatives to get your business up and running.
Should you be looking for funding, the following finance options are a great place to start:
1. Online lenders
Online lenders are growing in popularity primarily because they offer overwhelming speed: loan applications can require as little as an hour to complete and receive a decision in a matter of days. In fact, industry leaders fully expect online lending to serve more than 70 percent of small businesses in the coming years, even with increased regulation.
2. Venture capitalists
Not all small businesses are worthy of a VC firm’s time or money, but if you have a promising tech startup, you might as well pitch your idea. Venture capitalists can provide millions of dollars in funding to help startups grow big and strong insanely fast.
However, it is important to note that by supplying funds, venture capitalists seize some authority over your company’s direction in the hopes of recovering their investment within three to five years.
3. Angel investors
Perhaps every entrepreneur’s fantasy, angel investors offer money with almost no limitations. Often, angel investors will also provide guidance and support without expecting much more than a 20 percent return on their investments.
One caveat: angel investors can be incredibly tricky to attract. Be creative in your approach and maintain their interest to receive funding, attention and other benefits of angel investment.
4. Invoice factors
If you have a B2B business that has been growing happily and healthily for several years and are looking for a funding option to help regulate your cash flow, you should seriously consider invoice factoring. This practice allows you to sell your unpaid invoices to a factoring company. The primary benefit of factoring is that you get your hard-earned money sooner, minus a fee. With that cash, you can ensure stability during seasonal lows, invest in new areas of growth or merely hold onto it, with none of the strings of other funding options.
5. Credit cards
Business credit cards work almost identically to personal credit cards, allowing you to make business-related purchases using credit. Business credit cards tend to have higher limits (as well as higher interest rates), and they lack the traditional consumer protections enforced by the Credit CARD Act of 2009.
Additionally, your behavior with your business credit card could impact your personal credit score, so you must be careful when using credit to fund your business. Still, most small businesses utilize business cards often.
6. Lines of credit
Lines of credit are like a mix between credit cards and small-business loans. Lending companies give you a maximum line, from which you can draw down to pay for essential business practices, like equipment, construction or payroll. You only pay interest on the money you use, which makes a line of credit more manageable than a large loan. Plus, you can acquire lines of credit through online lenders.
7. Crowdfunding sites
The trendiest and most tempting of non-bank funding options, crowdfunding seems to promise near-limitless funds for virtually no effort and no guarantees. However, the popularity of crowdfunding does necessitate expansive marketing campaigns to make your crowdfunding opportunity visible to your audience. Though the rewards of success are incredible, achieving it is less likely unless you have a unique, exciting prospect that is likely to go viral.
8. Government grants
Many government agencies are devoted to helping small businesses succeed, and if your idea is innovative enough, you might secure a government grant that not only provides extra funding but also establishes guiding goals for your business. You should investigate grant options offered by Small Business Innovation Research and Small Business Technology Transfer, both of which are programs organized by the Small Business Administration.