Options for Financing New Business
All new businesses need one thing to get started, and that one thing is financing. These days, there are more and more options for business owners to get the business financing they need. Here are just some of the ways you may be able to finance your new business.
Traditional Loans
Many new business owners turn to the traditional bank and SBA loans for funding. Bank loans come in a variety of forms. They can be short-term or long-term, and they can come with different criteria for approval. They can also be difficult to obtain if you have poor or even no established credit.
SBA, or Small Business Administration, loans are a type of bank loan which is backed by the SBA. The bank underwrites your loan, but the SBA guarantees a percentage in case of default. These loans are very popular with new business owners because banks are more likely to finance an SBA backed loan for those otherwise unlikely to qualify.
Lines of Credit
When traditional loans aren’t available, or when they don’t suit business needs, lines of credit are another option for business financing. These can be in the form of business credit cards, or bank lines of credit. If you choose to use a business credit card, it is best to do so for small, short-term financing. The interest and fees can accumulate quickly, but access to the cash is immediate. Bank lines of credit are available when you need them and can increase over time with a proven on-time payment record.
New Loan Options
New to the business lending scene are peer-to-peer loans and crowd funding. Peer-to-peer loans can be obtained through online marketplaces. The loan is provided by individual investors, but all of the transactions take place through the marketplace. The online marketplace acts as a third-party escrow service for the loan.
Crowdfunding is similar to peer-to-peer loans in that the money comes from individuals who wish to invest in your business. The difference with crowdfunding is instead of a loan, individuals make a donation to your business, or pre-buy a good or service with the goal of getting your business funded.
As a new business owner, it’s likely that you will have to seek out sources to obtain the cash you need to get your business going and growing. Thankfully, in today’s world there are many options available for every type of small business out there. From traditional to new types of loans, business owners have plenty to choose from to meet their business financing needs.
