It’s hard to find funds for a startup. This is common knowledge among business owners. Besides, who would want to invest money in a venture that hasn’t even churned out money yet. The risk can be too high for many lenders. That is why despite the diversity of business loan programs available today, it can still be a struggle to find the funding you need to jump start your own business.
So where do you turn to when your bank turns down your application for a business loan?
Lending has evolved throughout the years, allowing business owners access to funds without the conventional hassle of having to deal with your bank’s stringent requirements. Today, you can find the financial help you need from the following alternative sources:
Personal loans are flexible. You can use them for any kind of purpose, and for this, they are becoming a common alternative among business owners who can’t get qualified for a business loan. A downside to this option, however, is the high interest rate.
SBA loans, microloans
The United States Small Business Administration offers microloan programs that lend startups the funding they need to get things going. On average, small businesses get about $13,000 for a microloan, but you can borrow as much as $50,000.
One of the most famous loan programs under the SBA is the 7(a) loan program. If you can provide collateral such as a property (e.g. house) or an equipment (e.g. car), you can qualify for the loan. Qualifications can be tough, but not for the prepared business owner who knows what to expect. Check out the SBA website to know more about their loan programs.
Non-profit lenders also offer micoloan programs for small businesses. This is a good alternative route for business owners who have difficulty getting financing from any other lender. They generally cater to disadvantaged entrepreneurs or those business owners with shaky finances. Check out your local area if there are non-profit microloan lenders available.
The government and other private institutions offer grants to those who fit their qualifications. If your business product caters to a specific niche and has a unique offer, you have good chances of finding grants. Others cater to a minority or a particular group of entrepreneurs (e.g. technologists, women, etc.). Keep in mind that this is free capital so you should be confident that you will be able to deliver.
Credit cards are handy, not just for small purchases but also for your business. If you were able to get a microloan but the funds were not enough to cover all the expenses to run the business, using a credit card can be an easy way out of the dilemma.
The evolution of the web has clearly redefined business. Through the internet, small business owners can solicit funds to get their work started by soliciting financial support. This is done via campaigns and the “donors” are paid back with gifts, not money.
This is a good way to bypass the complexity of getting a loan from a lender, and for business prospectors to get their product out there and test the general interest on what they have to offer.
When talking about money online, however, certain security concerns might be also be part of the risk, so it is necessary to take extra caution.
Most people shy away from borrowing from friends and family. When things get tough and money is involved, you risk losing not just your financial integrity but also your family’s trust. However, if you are honest with your intention and know that you will be able to hold your terms, financing through friends and family can be an effective – not to mention easy – way to get the money you need.
Still, see to it that you treat the transaction like business. Don’t rely on word of mouth. It will also help the other party establish trust on you and let them see that you are serious about making a deal with them and their money. Draft the necessary documents and let the parties involved sign them.
Explore the options available to you and get your business loan in no time.
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