How do you get the funds that you need to start a business? Consider these options.
According to the U.S. Small Business Administration (SBA), there were about 28 million small businesses in the country in 2010. However, only 50% of new businesses will survive for 5 years and a mere third is expected to remain in operation for more than 10 years. Despite these figures, more than 500,000 new businesses were established in 2012, according to a study conducted by the Harvard Business School.
Starting a business is not an easy feat. According to the SBA, the average cost of starting a new business in 2009 amounts to $30,000. While this may seem like a ridiculously high number, there is a wide range of options that new entrepreneurs can rely on to finance their business ventures. Here are some of these options.
Go for self-financing.
Some people have the option of using their own reserves to finance their startups. While this can be a relatively easy way to get started, you will be putting your own assets at risk in case the venture fails. If you decide to go for this option, you can tap your personal savings, use your credit cards, sell personal assets, or borrow against the equity in your home. You can also choose to take out a bank loan, or cash in your retirement accounts. Some of these options carry significant risks so do your research before making a move.
Get help from family and friends.
If you can?t tap your personal reserves or obtain a bank loan, you can try to convince your family and friends to lend you the money that you need to start a business. According to a study conducted by Pepperdine University during the first quarter of 2015, 68% of small businesses obtain their startup capital by using this option.
Apply for SBA loans.???
If you need less than $5 million to start your business, and your business complies with SBA standards, you can try to qualify for the 7(a) Loan Program. You can also try the SBA Express Program and its Microloan Program to see which works for you best. Note: The SBA does not directly lend to small businesses but it offers a variety of guarantee programs for loans made by qualifying banks, credit unions and non-profit lenders.
Seek help from angel investors.
Angel investors do more than just provide you the capital that you need to get your business off the ground. Some will even provide you the guidance that you need and leverage their existing networks to help you out during these critical times. To get in touch with angel investors, try contacting some of the following organizations:
Consider these options when starting a business and you can improve your chances of raising enough capital to set the wheels in motion.