Whether you want to fund your startup or are looking for finances to grow and expand your small business, finding the right financial option can be more than challenging, especially in a tough economic climate. However, you need to analyze your business plan and all of your goals first, so that you can be able to find the right solution for funding your business.
Lack of funding is one of the most common reasons why a number of businesses fail or don’t even get off the ground but, fortunately, there are many financing options to choose from. You need to choose wisely, so as not to end up back at square one, so take a look at the best and most effective financing options available, as each and every one of them will help you secure the funds you need – all you have to do is pick the one that will be the right fit for your company.
1. Angel Investors
Attracting an angel investor is a great way to finance your small business. Many successful companies, including Google, were able to make it through their startup phase with the help of angel investors. By seeking their help, you can get expert advice from someone who has strategic experience and can provide you and your company with huge benefits.
However, in order for an angel investor to fund your small business, you need to provide them with a certain percentage of your company. Usually, they ask for a 20-25% ROI. If you are ready to embark on such a journey, then finding an angel investor is your way to go, because you can be sure that they will be of significant help when it comes to either starting or growing your business.
Crowdfunding is another great way to raise money for funding your business. It can be very effective and you can manage to get all the money you need pretty quickly. All you need to do is present your business idea and set the goal amount of money you would like to raise, as well as set a particular period of time for your crowdfunding campaign.
However, have in mind that crowdfunding is not about long-term investments. It is about asking people to invest what they can in your particular project while, in return, you will provide them with a reward after your business idea has been realized. This means that you take a pledge to provide all of your investors with a sample of your product after its launch, for instance, or any other form of compensation in exchange for their funding.
Also, crowdfunding campaigns can take a lot of time to actually bear fruit, but you can still manage to receive quite large investments. Kickstarter and Indiegogo are excellent crowdfunding platforms, so make sure you check them out if you choose this financial option for funding your small business.
3. Credit Cards
You can also use credit card financing to fund your business and get it off the ground. However, this is an option that carries the most risk because, if you fail to provide payments on time, your personal finances will suffer immensely.
Personal credit cards can provide your small business with significant cash flow, but you must make your payments on time. Otherwise, getting out of debt will be extremely tough. The real downside to credit card financing is that credit card interest rates are very high so, if you happen to fall in debt, it can be a really expensive one to get out of it.
Nevertheless, you can make credit card financing work if you are wise and careful, and you get your finances in order. If this happens to be the only option that works for you, make sure you delve deeper into the matter and learn everything there is to know about it, as well as seek the help of an experienced professional who can provide you with expert advice.
4. SBA Loans
SBA loans can also be of great help when it comes to either starting a new business or expanding an existing one. They are guaranteed by the SBA (Small Business Administration) and, since they have very low annual percentage rates, they seem to be one of the best ways to fund your small business.
However, getting an SBA loan can be a bit tough, because you need to meet a lot of criteria, not to mention that it can take months for you to receive the funding if the loan gets approved. Fortunately, SBA loans include several different programs, of which microloans are the best for small businesses. The criteria for getting a microloan is very flexible and you need to prepare less documentation than a bank would requireThe third Federal interest rate increase since the financial crisis could seriously affect small businesses, which is exactly why you should seek alternatives to bank loans when it comes to financing your small business. In order to ensure growth and secure the cash flow your business needs in order to be successful, you need to explore all the options available and make a smart plan that will bring you positive results.