The first hurdle you face when you’re starting your own business is finding the money to cover your startup costs. You can save up some of that money yourself but most people can’t afford to save it all themselves. That means you’re going to have to borrow some of it. Traditionally, people would just get loans or small business Merchant Cash advances from a bank or lending company but in recent years, different borrowing options have become more popular. If you’re struggling to get approved by the bank, try some of these alternatives.
Line Of Credit
Taking out a lump sum from the bank isn’t always the best idea because you don’t know exactly how much you’re going to need before you’ve started trading. That means that businesses either end up taking more than they need or not borrowing enough. A revolving line of credit is a better option for most people. The bank will set a top limit and you can take money out as and when you need it. A line of credit stops you from taking more than you need and getting into unnecessary debts during the early stages of your new business.
Friends And Family
This is one that you’ve got to be careful with because you can get yourself into some awkward situations if you’re unable to pay it back. Any family members in a good financial position could be willing to give you a helping hand to get things going. However, it’s important that you set out clear repayment terms before they agree to lend you the money, otherwise, you could end up getting into disputes with them over it in the future. It’s also important that you make it clear that you can’t guarantee that the business is going to take off and come up with a repayment plan if things don’t work out.
Local and federal authorities are keen to encourage small businesses so they sometimes offer financial help to new startups. In some cases, you can get a grant which you don’t need to pay back which is a huge help. Even when the money does need to be paid back it’s usually interest free which makes it far more manageable than a standard loan. Get in touch with your local authorities and ask what they have to offer but don’t get your hopes up because only specific businesses qualify.
I know I said before that most people won’t be able to afford to save up but that’s not completely accurate. Most people won’t be able to afford to save up for it quickly enough to start the business soon. If you saved for a good few years you could get the money together, as long as you don’t mind waiting. The benefit of doing this is that you don’t burden yourself with debt and if the business doesn’t work out, you aren’t in a difficult financial situation. It’s also important to set up a small business banking account so that you can handle your small business properly.
When you’re deciding on how to fund your small business the first thing to consider is whether you’re willing to wait a few years until you’ve saved up the money yourself. If you aren’t, use one of these lending streams.