WHERE TO GET LOAN FOR BUSINESS

Lenore Staats

Every year, thousands of people start their own companies. According to the Small Business Administration (SBA), there were 27.9 million small companies abroad in 2010. Many of these, more than 75 per cent have been listed as “non-employer” companies by the government, meaning the owner is the only individual employed […]

Every year, thousands of people start their own companies. According to the Small Business Administration (SBA), there were 27.9 million small companies abroad in 2010. Many of these, more than 75 per cent have been listed as “non-employer” companies by the government, meaning the owner is the only individual employed at the company.

It’s necessary that you find ways to fund your business before your company can have any chance of becoming an incredible (or even just profitable). Check out an online startup cost calculator to estimate what it will cost to launch your company. Although the figure may sound incredibly significant, entrepreneurs today have a wide variety of options when it comes securing a business loan.

Ways To Raise Funds For Your New Business

1.   Self-financing

Although it can be straightforward to self-finance your startup, it comes with a significant downside: If the plan does not turn out, you are absolutely on the hook. Nevertheless, it can be an enticing choice, particularly for entrepreneurs who want to model the slow and steady approach of closely-held companies. If you can get the funds you from your savings, there are a variety of ways you can go about it.

 The reality is that most entrepreneurs have personal savings to finance. However, before you make a significant withdrawal, I suggest that you set aside at least one year’s fixed living expenses (such as your mortgage and insurance needs).

2.   Angel Investors and Venture Capital Corporations

It can be a high-wire dance to get money out of them. But if you can do a bit of soft-shoeing and have a great idea and excellent business plan, these types of investors will indeed back you up in exchange for equity or partial ownership.

3.   Corporate program

Some large corporations also provide support for small business startups. For example, Michelin North America, based in Greenville, S.C., has offered low-interest funding loans ranging from $10,000 to $100,000 to individual minority-owned and distressed companies in parts of South Carolina, including women-owned firms.

4.   Loans on Home Equity

If you have built up substantial equity in your house and a credit score well above 700, this route could be quite the right choice. Usually, the funds are taken as a lump sum and can be paid off over time. And interest is not sky-high right now, about 4.5 per cent.

5.   Using your Credit Cards

Credit cards can provide a fast and straightforward way to fund the purchase of products needed to start a company. If you are interested in this part, you can read more about SafetyNet credit. However, it is essential to note that credit cards often come with high-interest rates on balances which remain uncleared at the end of the month. For those with a good credit rating, interest rates on unsecured credit cards vary from around 13 per cent to 22 per cent as of April 2015. If you miss a bill, however, the rate will rocket up to 29 per cent.

It can be quite challenging keeping up with payments, in the months before the company earns enough income to start paying off the debt, If you’re going to use credit cards to fund your small business startup, it’s better to use reward or cash-back cards to buy products. Often, if you plan to borrow the money for a limited period 18 months or less look for credit cards with an annual introductory interest rate (APR) that is low or 0 per cent.

6.   Friends and families

If you can’t reach your piggy bank or if your credit score isn’t strong enough to persuade a bank to lend you money, you can always turn to those who know you best. It can be easier to reassure family members and associates than anonymous bank officials. They are also more likely to look beyond your current account balances and credit score when deciding if the possibility of extending a loan is worth your while. Moreover, they are less likely to seek strict repayment terms or high-interest rates, and you can avoid interest rates entirely in the case of family members.

7.   Loans to Small Business Administration (SBA)

The SBA, established by Congress in 1953, does not explicitly lend to small businesses. The SBA also provides a range of loan guarantee services offered by eligible banks, credit unions, and non-profit lenders.

Despite the ongoing effect of the economic crisis and recession, the SBA says it is observing its loan programs ‘Unprecedented growth.’ According to the SBA, the number of loans provided to small businesses in fiscal 2014 jumped 12 per cent over the previous year, while the dollar amount of those loans rose 7.4 per cent over fiscal 2013.

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