If you own or manage a startup, the time might come when you need financing to grow your business or get it out of a sticky situation. But unlike how it is with established companies, you might find it hard to qualify for more traditional financing options.
Among the challenges a new small business faces, the toughest may be raising the capital needed for its initial growth. Small businesses are the primary source of U.S. job growth, but they are more likely to face financial challenges accessing borrowed capital than larger companies. You might need small loans to have the money you need for your startup.
There are different types of startup financing you can consider:
1. Equipment Financing
A bank usually provides this type of financing. It is used to buy equipment for the business, although it can be used to purchase furniture and fixtures. It can also be used for any type of asset needed for your business, including vehicles. Equipment financing is subject to some type of collateral, usually a fixed asset.
2. Accounts Receivable Financing
This type of financing is usually provided by a factor or company specializing in providing accounts receivable financing. It lets you sell your invoices to the factor at a predetermined percentage of what’s due.
Crowdfunding is the process of raising capital from a large pool of investors, typically via the Internet. Many of these crowdfunding platforms allow businesses to raise money in exchange for an equity stake in their company.
4. Credit Cards
Credit cards are an easy way to finance your business, and there are tons of credit cards designed specifically for small business owners. These cards have some attractive features. But you need to know that credit cards aren’t free money. They usually carry an annual fee and high-interest rates. Moreover, you should be aware that credit card interest rates are typically variable and can rise substantially if you miss a payment or carry a balance from month to month.
5. Line of Credit
If you are a small business owner, you can probably get a line of credit from your bank. This is a great way for larger businesses to get immediate access to operating capital. If you’re a small company or have a limited credit history, you may need to get a co-signer to serve as a guarantor. If you’re approved for a line of credit, it would be set up as revolving debt, meaning you could borrow against it over and over. But be aware that borrowing against a line of credit can be expensive.
6. Short-Term Financing
Short-term financing is for companies with an immediate need for cash to buy inventory, meet payroll and make other required payments. Short-term financing is usually small and can be up to a one-year term. These loans are generally not subject to a credit check but are secured with collateral.
Final Thoughts On Startup Loans For Your Business
To sum it up, getting financing for your startup business is not easy. The process typically starts with your preparation before the fundraising process begins. There are different options to choose from, depending on your funding needs. Your business plan should illustrate how you expect to use small loans or financing solutions to benefit your business.
Opelika Finance is a, local finance loan company that can help you get your startup up and running. Contact us today to know your options!