Do you have a business idea that you know will take off once you get the business started? Or maybe you’ve already launched a venture that has the potential to expand? Whether you’re looking to open a new company or expand a business that you currently run, it costs money. Knowing that your business has potential, but the only thing holding you back is a lack of funding can be incredibly frustrating.
If you’re in this situation, don’t despair. There are options available to help you expand your business or get a new idea off the ground.
Microloans are small loans that are typically offered to start-ups and small businesses. The loan amounts are small, but the terms are reasonable, and the interest rates are low, so it’s less of a challenge for small business owners to repay.
These loans are aimed at business owners from poorer communities whose businesses are not yet financially stable. The lenders are usually non-profit organizations that want to uplift businesses in disadvantaged communities. Apart from the funding, they may offer other services like business advice, training, and consulting.
If your business is a few years old and you can show that it’s financially stable, you may qualify for a business loan. Having a bank account and a good relationship with your bank will also help convince the bank to give you a loan.
Banks offer various business loans in different amounts, each with its terms and interest rates. Installment loans are a common option. These loans pay you the total amount you need to borrow, and then you have to make monthly payments until the total amount, including the interest and fees, is paid back.
Personal loans are a great option because of how versatile they are. You can use a personal loan for anything, including funding business expenses. You can apply for a personal loan with a traditional lender like a bank or with other lenders.
Before applying, you should find your credit score, as this will narrow down your options. If your credit rating is high, you can easily secure a personal loan with good terms and a low-interest rate from a traditional lender, but if your rating is poor, you should explore alternate lender options. With a low credit score, you may only qualify for personal loans with higher interest rates and less favorable terms.
Something else that affects the interest rate is where you live. For example, in Fresno, CA personal loans will carry a different interest rate than similar loans in Kansas City.
The two major types of personal loans are secured and unsecured.
Secured loans usually have lower interest rates since you have to provide collateral. You can use an asset like real estate or a vehicle as collateral. Offering collateral reduces lenders’ risk because if you default on repaying the loan, they can seize your assets to compensate for the loan repayments.
If you’d prefer not to risk an asset, you can apply for an unsecured loan. These loans have higher interest rates because they put the lender at a greater risk. Still, it’s a good option if you are not 100% certain that you can make the repayments.
Line of Credit
Having a line of credit is helpful because it allows you to always have access to funding without needing to apply for a new loan each time you need financing. A line of credit works precisely as a credit card. You have a set amount of credit available to use. When you borrow money and subsequently repay it, the credit is replenished.
Apart from the convenience and ease of use, you only pay interest on the amount of money you use and not on all the available credit. It can make it cost-effective, provided that you repay what you owe within the billing cycle.
Crowdfunding is a relatively new concept made possible by social media. You can launch a crowdfunding campaign on social media or a crowdfunding website, inviting investors to invest money in your business. The great thing about crowdfunding is its ability to reach the masses so that instead of relying on one or two investors, you can collect small amounts of money from hundreds of people who might be interested in your company.
Depending on what you choose to offer, investors can receive equity in your company, or you can send them a free product. If done correctly, crowdfunding can also be a fantastic opportunity to showcase a new product that people may not have seen before and to generate public interest in it.
Get a Partner
If you’re willing to give up partial control of the business, it may be worth looking into getting a partner to buy into your business. A partner can provide capital and, depending on their experience and knowledge, can also add value in terms of skill and advice.
Before signing any paperwork, iron out the details of who will be responsible for what and how the company will be divided. For example, will they be investing a sum equal to your investment so that it’s a fifty-fifty split, or will you divide it by making you the majority shareholder and having the final say in all decisions?
You may also decide to take on a silent partner. In this case, your partner will not be involved in the business’s operations and will only receive monetary compensation for their investment in the form of dividends.