Anyone can come up with a business idea, but it takes money to put an idea into action. If your business does not take a lot of start-up cash, or you have a heft savings for starting a business, then you likely won’t need to worry about other means of funding. But, if you are starting a business that requires substantial start-up capital, then you will have to look for other options:
1) Borrowing from people. Whenever you borrow money from family or friends, things can get dicey. Make sure that if you take this route, that you have a promissory note outlining your payment terms (payments, amount, interest, etc) and have discussed what will happen and how you will re-pay if your business fails. This option also includes crowdfunding and there are many different sites out there right now. I don’t have any personal experience with borrowing from family/friends – or getting money from crowdfunding sites.
2) Borrowing from a bank. This includes Small Business Administration Loans since they require a bank partnership. To borrow from a bank you will need a business plan, 10% – 30% down, and strong personal financial statements. You’ll also need a decent credit score. They want to make sure that you’ll be able to re-pay if the business fails. These loans can be anywhere from a few thousand to millions of dollars. If you need more than $15 – $20k, I’d recommend going for a SBA loan. There are many smaller nonprofits, like Women Venture, that provide loans for small businesses to start and grow.
3) Borrowing on credit. If you need under $15 – $20k, I’d recommend getting a credit card (assuming you can get a credit line that high). To do this, you’ll want to have enough cash for things that need cash (like payroll) – but using a credit card instead of a loan can save you money (many are interest free for 12 months or more), and time (you don’t need a business plan). Not to mention it’s much, much easier to get a credit card (can take less than 5 minutes online!).
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