Finding the right funding options for your small business
Having a small business idea is simply the first step. Times are tough and you might need to invest some cash for turning your dream into reality. An entrepreneur, who starts a business with a combination of funds from his credit cards and personal savings account, is definitely walking down the wrong path. There are abundant financing options for launching a small business, but it’s often seen that individuals aim for the wrong kind of funding for their type of business. Deciding funding for your small business idea could be tough but with proper planning and research, you may obtain the cash you require. Following are a few funding options that might just fit your business plan.
Debt financing
A majority of new small businesses are subsidized with debt financing from financial institutions. In case you become eligible, banks may present you with a loan or cash advance that comes with a reimbursement program and an interest rate. They’ll consider your business cash flow, collateral and the liquidity of your assets. You must possess a rational, written business plan, and you need to have a thorough understanding of your financial condition. Remember that one way of increasing your chances of success is to build an association with your banker before your loan request.
Grants
If you’re in the tech field, you may consider obtaining a grant via the SBIR or Small Business Administrations Small Business Innovation Research Program. Also, there are countless state, provincial and minority grant prospects on hand. By functioning jointly with a government organization in a CRADA or Cooperative Research and Development Agreement, you’ll also be able to optimize resources and perform gainful research. These programs are intended to help stimulate the innovative flames at small businesses. As you’re on the receiving end of these grants, you need to be cautious of “free money” offers.
Equity funding
Although debt funding is pretty common, there are countless organizations funded each year by “institutional” or private investors in trade for an equity ownership risk. The range is vast from the less cultured "friends and family" type, to private investors identified as "angel investors”, way up to the classy proficient investors known as venture capitalists.
Family and friends
If you fail to obtain debt financing, you may consider asking your relatives for a little monetary help. Although it might be true that small business funding from friends and relatives are normally available in small quantities and without much hassle, you need to be careful. Remain professional and communicate more frequently. Based on your priorities, understand that business entail risks, and maintaining your relationships with family and acquaintances is just as essential as your business opportunity.
