Getting financing to open or develop a company is one of the main challenges that small businesses face. The lack of banking products for startups makes it difficult to get loans, because of that, entrepreneurs use credit cards to invest in their business but we know they’re not meant for that. Have you dealt with this kind of situation?
Using personal credit cards for businesses is not the most appropriate strategy. These resources are designed for use in small purchases, lines of credit at the beginning are low and they also have high interest rates. At some point, these reasons will make it difficult to pay on time, especially in the early stages of businesses when they still do not generate profits.
Fortunately, beside credit cards, there are other and better small business financing options that you can benefit from. Down here, we list the 5 most effective ways to get financing for your business.
It is one of the most common alternatives for small business financing. It consists in starting entrepreneurship with your own money, generally it is for small investments. The growth of your business can be slower due to the lack of capital to buy inputs, machinery or design a marketing strategy, for example. But it offers a great advantage, you don’t have to report numbers to anyone.
It is a collective financing tool, currently there are multiple platforms dedicated to collect money for mainly artistic, social and business projects. The challenge is to get people interested in your project, consider that you will have to give a reward in exchange for donations.
This option is the one that offers the most advantages because they have products tailored to your business goals and payment possibilities. For example, Camino Financial works with a pre-approval process with a 24-hour response and specializes in small business financing, so it is easy to meet the requirements.
To access small business financing is not always easy, business angels are a good option to inject capital to startups and that’s not all, they also contribute with their experience and knowledge for developing small businesses. These angels use their own money and it’s their decision to invest, based on future plans, so they only invest in big ideas. It’s really like finding a mine of gold for a business, unfortunately, there’s not one in every corner.
Venture capital is a small business financing tool, temporary and short-term. The investments are controlled by a Private Capital Fund and are granted to startups with high growth and expansion possibilities, in addition they ask for a high rate of return on investment.
Before choosing any of the options above, consider the benefits and disadvantages of each one. You have to take into account the offer and value that will bring to your business, beside the monetary. The first step is exploring your direct possibilities such as personal savings or friends and family loans, select options that you think are reliable.
Also consider the possibility of approaching government programs or capital subvention, they operate on the basis of non-refundable support. These contributions can be given as financing or in specific benefits.
If you choose to add investors in any of the options mentioned, remember that you will need to commit to achieving the goals that you set for your company to not disappoint them. Accessing small business financing can be the difference between success and failure.
In the US, 25% of companies closed down due to money cash flow, according to U.S. Small Business Administration (SBA). Don’t become part of these statistics. Share with us what are your main financing alternatives.