Do you know that around 20% of small businesses collapse in their first year?
What is the main reason?
The main reason for collapsing in the first year is running out of funds.
A business owner wishing to start a small business will have to make sure you have enough capital to get you started, or else collapse to the ground.
Owning a business is always about the owners looking for new finances and funding streams, from wherever they can, it can be from a financing business or from a private individual.
Small Business Financing
Nowadays, there are many routes for business owners to take to secure funds from traditional or modern funding methods.
The question which arises is:
What financing method for a small business is the best one for you?
Let us look at a few methods you can go through to get the capital you need to start your business or turn your small business into a small empire.
What to do Before Applying for Small Business Financing?
Below are the two steps you should do before searching for a company to give you funding for your business.
– First
Write a comprehensive tangible business plan.
The business plan should consist of your business aims and objectives.
Moreover, it should include an executive summary detailing all the people within the company, their roles, the senior management roles, and strong financial forecasts.
– Second
Keep an eye and work on your credit score.
Lenders will first view whether you are good at lending and paying back the money or not.
If you have a low credit score, look at ways to improve it. You can do that by paying any debt you have completely or closing any accounts which you do not use anymore.
3 Small Business Financing Methods
The followings are some Small Business Financing Methods that can help you in various ways easily for the long term.
- Small Business Administration
- Traditional Bank Loans
- CrowdFunding
Small Business Administration
New businesses started by new business owners can get the funding they want from Small Business Administration (SBA).
What is SBA?
The government started the Small Business Administration in the 1950s, helping entrepreneurs live their American dream.
SBA offices are located in many cities all over and have a simple process for people looking to apply for funding.
SBA lends around $5 million to a small business and gives them a time of 25 years to pay it all back.
Obviously, not forgetting the interest rate that will also get added.
The people who have a strong credit rating can get this type of funding.
Traditional Bank Loans
You could always take the more traditional route by taking a loan from the bank.
Every bank will offer a kind of small business loan within its own terms and conditions.
The repayment term and interest rate will be dramatically at each bank. That is why you should look around and go with the bank that suits your situation the best.
The loan criteria of a bank will be more complex and strict than the SBA loan.
Some banks only give out loans to established businesses.
Similar to SBA, you will have to have a good credit score to get a loan from the bank.
CrowdFunding
Do you have a product you wish to sell that catches the attention of the public?
If yes, then you can get Crowdfunding.
There are many sites, like Kickstarter for new small businesses, helping them find an individual investor who will invest in your business for something in return.
The only downside to this method is how you will have to persuade many investors, people to believe in your idea or business to get the funding you need.
How do You Plan to Fund Your Business?
A company starting out have to consider its financing, as that is the most important step for a business.
However, it’s up to you which route you take.
Research each method and go with the one that suits you the most.
Do you want to get a business loan from SBA, bank, or CrowdFunding?
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