Every year, more than 627,000 new companies open for business. Though they all serve different industries, every business owner faces a common challenge: finding the money they need to get their company off the ground.
Most business owners automatically assume that new business loans are the only option out there. Luckily, there are many other ways to finance your business.
Here are a few great options to keep in mind so you can bring your vision to life as quickly as possible.
1. Start With the People You Know
The easiest way to finance your up and coming business is to approach the people you know. Let your friends, family, and your professional network know about your new company.
Then, see if they’d be willing to get involved. Often, relatives and friends will be willing to lend you money as long as you agree to pay them back.
That said, there’s more to funding a startup than just securing money. Your network can offer their time, support, knowledge as well as their money to help you grow your business.
You just have to be willing to ask. If people tell you they’re not interested or can’t help you financially, don’t panic. There are plenty of other ways to finance your company.
2. Work With Lenders That Issue New Business Loans
Securing a business loan for a new business is notoriously difficult. Most lenders want to work with companies that have a proven history of profits. This gives them confidence that they’ll get their money back without a problem.
However, when your company is new, you won’t have that proven history of success under your belt. Unfortunately, some lenders may reject your application outright.
The best thing you can do is look for lenders that specialize in helping new companies and startups. These could be private lenders or wealthy individuals that believe in what your company offers or even local banks and credit unions that want the economy to grow and thrive.
3. Consider Crowdfunding
Crowdfunding allows you to turn to the general community when seeking financing for your startup. Instead of presenting your business to professional lenders and banks, you’ll present your company to people all across the country.
To be as successful as possible, you’ll need to explain what your services are and why your company is unique. You’ll also need to show how you’ll use the money and specify the amount of money you need.
The most successful crowdfunding campaigns offer something in exchange for monetary support. You don’t have to offer something terribly expensive to everyone who contributes. Instead, keep the rewards proportionate to the contribution.
Many companies offer stickers or other small branded items for smaller contributions and larger items like discounted products or freebies for larger contributions.
This can help you immediately build brand recognition while getting future customers excited about your company.
4. Look for Alternative Loan Options
Believe it or not, traditional business loans are just one type of loan available to startups. In fact, alternative loan options are often easier for new businesses to qualify for in the first place.
For example, if your business relies heavily on invoices to bring money in, invoice factoring may be an option. With factoring, you essentially sell your outstanding invoices for cash upfront. The lender then settles your debt when your clients pay the invoice in full.
If you sell products to your customers rather than just your services, you can leverage your future sales in exchange for money with a merchant cash advance.
Start doing your research and take the time to learn more about the options at your disposal. These alternative ways to get a startup loan for a new business do come with higher interest rates. However, they’re easier to qualify for in the first place.
5. Rely on Your Savings
You don’t always have to finance your company with new business loans. In fact, you’re free to use your personal savings to help fund your company.
When you do, you won’t have to worry about interest payments or increase the amount of debt you carry at any given time. However, you do need to make sure you still have enough money saved up to cover unexpected personal expenses.
Most business owners choose to combine using personal savings with small business loans to finance their company.
6. Partner With Investors
If the idea of taking out an SBA loan for a new business or working with a different type of lender isn’t something you’re comfortable with, you’ll want to look for investors. Investors can be any other business or private individual willing to give you money in exchange for part ownership of your company or a share of your future profits.
Working with an investor doesn’t mean you’ll lose ownership of your company. It just means you’ll be sharing it with someone else.
This allows you to leverage their personal finances to help you get better rates on new business loans if you need extra money in the future.
7. Pay For Things With Your Credit Card
It is possible to help finance your business by using your personal credit card and many new businesses do. However, it should always be a last resort.
Remember, your credit card likely has an interest rate that’s much higher than any business loan you’d be able to take out. If you choose to use your credit card, make sure you have a plan to pay the balance off in full before you make the purchase.
This way, you’ll be able to avoid getting into too much debt or dealing with overly high interest payments.
Explore These Financing Options
As a new business owner, finding money to help you grow your company can be challenging at best. Keep these great financing options in mind and you’ll be able to find the best new business loans for your growing company in no time.
Just remember to only borrow what you need. The last thing any business owner wants to do is borrow too much that they have trouble making the minimum monthly payments.
Looking for more tips to help you make your business as successful as possible? Check out our latest posts.