Finding Financing for a Small Business

Funding for small businessesStarting a small business can be a great way to jump-start a faltering career, but money often holds you back. Even once you’ve found the funds to start a small business, you may discover that a lack of ongoing financing is keeping you from purchasing equipment or services that would help your business get to the next level. There are many types of financing for small businesses that you can consider obtaining as a way to start or expand your business.

Personal Funds

If you have personal savings that are readily accessible to you, this money may be the best way to start a small business. It’s easiest to obtain, and you won’t have the burden of having to pay back debt even if your business does not end up being profitable. However, this is also risky if you had other plans for the savings, like buying a house or paying for your retirement. Therefore, you need to be willing to risk losing the money if you’re going to put it into your business.

Venture Capital

Getting investors for your small business can help get it off the ground and is low risk for you because you generally pay back this initial investment through your business profits. Depending on how well your business does, you may end up paying your investors far more than they initially invested, or far less. If you take this route, you generally need to have strong business plans and proposals, and you have to be willing to give your investors a say in how your business is run.

SBA Loans

The United States Small Business Administration backs several types of loans that you can get through your local bank or credit union. Because of the backing from the SBA, lenders are more willing to provide these types of loans. There are many to choose from, and the loans offer reasonable interest rates and repayment terms to give your business the best chance of keeping up with payments and paying back what you borrow in a timely fashion.

Credit Cards

Personal and business credit cards can both provide for your small business’ short-term cash needs. If your business needs to get a new piece of equipment or other supplies to increase its profitability, buying these with a credit card gives you the flexibility to pay only a little each month for them until you are able to pay off the purchases in full. Using a personal credit card to start a business is the easiest way for many start-ups to borrow, but remember that you are personally responsible to pay your debt, even if your business fails.

With all types of small business financing, make sure you understand how much you will owe on an ongoing basis. You will need to budget the cost of your debt into your small business plan and ensure that you set aside enough of your profits each month to keep up with payments. Building credit history for your small business early on can help you get financing more easily later.