How to finance your business


Financing a business is always a challenge. Some entrepreneurs may not have the cash they need on hand when they want to launch, but there is a wide variety of both traditional and innovative funding sources which can help them. Whether your goal is to open a shop or to launch a new app, one of these options is likely to be the perfect fit for your next business.
Raise Money from Your Family and Friends
It’s the most common way to finance a start-up. Borrowing from friends and family presents an interesting alternative to traditional forms of financing, and can have some unique advantages, including low- or no-interest payments.
A classic mistake is approaching friends and family before a formal business plan is even in place. Instead you should have a strong business plan to show you take their money seriously. It’s also important to emphasize the risk involved. Offer up a strong business plan, but remind them there is a good chance their money will be lost.
Get a bank loan
Lending standards have gotten much stricter, but banks such as Bank of America and J.P. Morgan Chase have earmarked additional funds for small business lending. It can be a good opportunity.
Get a Microloan
A microloan is a small business loan ranging from $500 to $35,000. Instead of a bank, you could to turn to a microlender, a non-profit organization that works differently than banks. Microlenders offer smaller loan sizes, usually require less documentation than banks, and often apply more flexible underwriting criteria.
Small Business Administration loan (SBA)
With banks reluctant to take any chances with their own money, loans guaranteed by the U.S. Small Business Administration have become a hot commodity. Traditional SBA loans typically take 60 to 90 days for approval and are distributed in amounts of $150,000 or more. Some programs, such as the new SmartBiz loan program by Better Finance Inc. and Golden Pacific Bank, offer approval for loans of $5,000 to $150,000 in just one week. The SBA also offers special business loan programs for military veterans and their spouses.
Online lending
Online lenders have the advantage of speed: an application takes only up to an hour to complete, and a decision and the accompanying fundscan be issued within days. In contrast, the traditional loan process can take weeks, or even months, to complete.
Angel investors
The principal advantage of an angel investor is generally that you have a friendly atmosphere and a quicker decision-making circumstance for a smaller amount of money. But remember: you’ll need market assessments, competitive analysis and solid marketing and sales plans if you expect to get anywhere with an angel.
Try Crowdfunding
A crowdfunding site like Kickstarter and Indiegogo can be a fun and effective way to raise money for a relatively low cost, creative project. These sites allow businesses to pool small investments from a number of investors instead of forcing companies to look for a single investment. Many sites allow companies to raise money in exchange for rewards or products. But keep in mind, this isn’t about long-term funding. Rather, it’s supposed to facilitate the asking for and giving of support for single, one-off ideas.

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