4 Financing Options Every Entrepreneur Needs to Know
Finding money isn’t easy for small businesses. Check out these four financing options for a quick cash injection.
It’s no secret that Silicon Valley’s once limitless funding opportunities are getting tougher to come by.
But even if you’re working outside the Valley, we know that you want to learn about the financing options you have as an entrepreneur. Either way, the truth is that the legendary “angel investors” may be on their way out.
And though you’ve worked hard to boost your startup’s reputation? You’re just not getting the funding you need.
So, what are your other small business funding options?
We’ll cover some of the most popular startup business loans in this post.
1. Term Loans
One of the most popular financing options for new businesses is a term loan.
This loan gives you a nice lump sum of money immediately, then you pay it back with interest according to your specific repayment plan.
Term loans are also well-liked because you’re able to borrow much higher amounts of money than you can with other loans and you can get that money quickly.
However, be aware that you may have to put up some serious collateral that will protect the lender in case you default on the loan.
And while you can secure high amounts of money from online term loans, be aware that online lenders will usually charge you a higher rate of interest than a bank would.
However, if you know you have strong credit, and if you simply can’t wait for your money — consider a term loan.
2. Payday Loans
Perhaps you need a small amount of money to cover a sudden, unexpected event.
You know that, if you just had a couple of extra weeks, you could easily get that amount of money together. But, you don’t have that amount of time.
While completely financing a small business with a payday loan likely won’t be possible (unless that business is your little cousin’s lemonade stand), these loans can help you get through tough times.
Essentially, your lender gives you a loan that’s similar to a cash advance on your next paycheck. Usually, payday loans will get you up to $1,000 in cash. You’ll need to repay the loan on your next payday (hence, the name) and you’ll also get charged a ton of interest.
This is also a wise option for those without a great credit score and you can usually apply in less than 30 minutes. Plus, the application and approval process isn’t nearly as strict as it can be with other types of loans.
Online payday loans no credit check are the ideal solution for those who need money ASAP but don’t need a large amount.
3. SBA Loans
SBA loans are also one of the most common entrepreneur loans for businesses of any size and within any industry.
They’re so competitive because they have very low-interest rates and even offer longer repayment terms. Plus, they’re actually guaranteed by the Small Business Administration.
Your repayment term is calculated based on what you plan to use the loan for. So, while some might have a repayment period of about seven years, others may even be able to get 25 years to pay back their loan.
This is because many entrepreneurs use SBA loans to buy real estate for their businesses.
You’re even able to borrow up to $5 million, though of course, that size of a loan is difficult to qualify for. If you’re interested in SBA loans, you can definitely expect a complicated application process.
However, if you need to refinance your startup, and if you’re prepared to wait a while to get a large loan amount, SBA loans may be a good fit for you.
So far in this post, we’ve spoken primarily about startup business loans that you can use to put towards office space, trade show booth, hiring the right team, and anything else you need.
However, what if there was a way to get funding from multiple people? What if you could let each funder give the amounts that they felt comfortable with? And what if, in some cases, the money was a gift?
All that and more is popular with one of the most popular financing options in the startup world: Crowdfunding.
There are lots of different crowdfunding platforms available to entrepreneurs. When you’re trying to find the right one for you, take a look at the timeline you can create, and the fees the platform will take.
You should also consider whether you’ll be able to keep your money even if you don’t raise the full amount you wanted to.
In some cases, crowdfunding platforms can work like “donations.” But in most cases, you’ll need to give those lenders something.
It could be access to your products before anyone else. It could be a set percentage of your income. It could even be in future stock if you ever go public with your company.
Just make sure the arrangement is something that works for — and truly incentivizes — potential lenders.
Which of These Financing Options Will You Choose?
We hope that this post has helped you to understand the most popular loans and financing options that could get your startup off the ground.
Remember to take a hard look at the application requirements, the repayment period, and of course, the interest you’ll get charged. You don’t want to get in over your head.
Looking for additional ways to finance your startup? Want to learn the perfect way to pitch to potential investors? Need advice on how to market your startup so that it gets the attention of the big names in your industry?
We can help you with all that and more.
Keep coming back to us to learn everything you need to know about how to succeed in the startup world.