Whether it is capital for expansion or startup funds, financing a business in any economic conditions can be challenging. Securing funds for a company has over time become as tough as ever. However, these few financing techniques can make it easier for small enterprises to secure financing.
Get a Bank Loan
Banks have over time made their lending standards stricter than ever. However, banks such as Bank of America and J.P. Morgan Chase continue to earmark additional funds for lending to small businesses. Nothing should deter you from trying to apply for financing from a banking institution. However, small business owners need to familiarize themselves with the process of applying for a bank loan.
One of the fun ways for small businesses to raise funds for creative and low-cost projects is to try crowdfunding. Set a goal for the capital you would want to build over a given period. However, entrepreneurs should note that crowdfunding isn’t a viable option for long-term funding; instead, it facilitates the financing of single, one-off business ideas.
Work with Angel Investors
All rules apply when an entrepreneur is pitching an angel investor. You should have an exit strategy, avoid jargon, and be succinct. However, finding an angel investor has gotten trickier over time due to the recent economic turmoil. But a few tricks including adding experience, knowing your staff, and keeping in touch with prospective investors can help a startup owner secure funds from angel investors.
Raise Money from Friends and Relatives
The easiest way to finance a startup is to borrow from friends and family members. However, turning loved ones into creditors can over time jeopardize the personal relationship and risk their financial future. For example, never approach a friend or relative for financing before you even put a formal business plan in place. Instead, provide them with an evidence-based assessment and structured financial projection of when they should expect their money back.
Tap into Your 401 (k)
Those funds that an unemployed person has accumulated in his or her 401 (k) can be tempting, especially when one is about to start a business. However, the provision in the tax code now allows people to tap into their savings in 401 (k) account without penalty as long as the right procedure is followed. Startups owners need someone experienced in setting up the appropriate retirement plan because some of these procedures may seem simple, but legally complex.
Apply for an SBA Loan
With lending institutions reluctant to take chances with their loans in the wake of the economic hardship, SBA loans have become a hot commodity. However, there are a few qualifications for these loans even if they are open to small-scale enterprises. For example, businesses that can’t obtain the amount of money they want to borrow aren’t eligible for SBA loans.