It shouldn’t come as a surprise to you that covering expenses and having enough left over to pursue growth is one of the biggest challenges of all new businesses. This is especially true when the company is new and you may not have turned a profit yet. It can also be difficult to know which type of financing to pursue. Below we discuss some of the most common types of business financing.
While a loan is the most standard way to obtain business financing, it’s important to understand that requirements for approval have gotten much more stringent. You should also know that it can take up to three months to receive an approval or rejection from a bank. Since the bank will review your personal credit, it’s a good idea to know your credit score before you apply. Be sure that you complete the application in full, including information about your company’s debts, assets, number of employees, and the business structure it falls under.
With this financing method, you sell unpaid invoices to a factoring company and receive their value upfront. However, the company deducts a percentage of the invoice to cover its fees and make a profit. Once you sell the invoice, you no longer have to worry about collecting on it if the customer defaults. The factoring company may request references from your customer before taking on the risk. You can sell a single invoice or a bundle all at once. Additionally, you may be able to reduce the fee you pay when several factoring companies bid on the invoices you want to sell.
Crowdfunding on sites like Kickstarter.com have become a popular way to raise money for new businesses. Getting started is as simple as setting up a small campaign and explaining what you plan to do with the money. Your potential donors could be friends, family, former co-workers, and anyone interested in the product or service that you intend to create. Many people who use crowdfunding offer donors a small token of appreciation, such as a coupon off future services.
Look for an Angel Investor
An angel investor is someone willing to put money into a new company for a potential pay-off later. We would be happy to help you locate a network. When you meet with the investor, be sure to show that you have completed a competitive analysis and market assessment. You also need to approach him or her in a confident manner and be willing to demonstrate that you have enough experience to withstand fluctuations in the market without losing your business.
Apply for a Small Business Association (SBA) Loan
To help encourage business growth, the SBA backs certain loans offered by banks. The criteria to gain approval for an SBA loan can be stringent, so we recommend spending time at https://www.sba.gov/ before attempting to do so.
If you are considering additional business financing options, please let us help. BizResults.com is about execution, getting things done, moving the needle, helping the business owner succeed. It’s always exciting to learn about the solutions and challenges business owners are facing daily, and to see how we can work together. We would love to meet with you and hear your story.