Business Brainstorming: Creative Ways to Finance Your Startup

You’ve got the idea; you’ve got the drive. Now all you need is the money to get started on your new business. Unless you are one of a very small group, you are going to have to raise it somehow. You can approach the bank for a loan, or you can explore some different options.

Loan or Equity

There are two main ways to raise cash to start your business, and you need to decide which works best for you.

A loan can be straightforward. You receive a sum of money to invest in your business, and you pay it back later. You remain in control of your business, but your overheads now include the interest and your cash flow is affected by repayments.

Equity is effectively the sale of part of your business to an investor. You do not have the burden of repayments, but you will share the profits and lose some control.

Do It Yourself

You may not have cash to hand, but you probably have assets that you could use to raise a loan—your house, perhaps. You are borrowing money against your own property to invest in your business. If the business fails, you could lose your home—but the fact that you have put your money where your mouth is will encourage other investors.

Family and Friends

Many entrepreneurs start off by borrowing from close contacts, or by offering them a share in the business in return for a startup investment. If you go this way, have your agreement drawn up professionally—informal arrangements are a recipe for disaster. Remember that if things go wrong, you could lose your friends as well as your business.

Line of Credit

A flexible way to borrow money is through a line of credit, where you negotiate a maximum amount that you can borrow (rather like a credit card) and then borrow and repay in a way that is convenient to you. http://businesslineof.credit/ is a good source of information about the loans that are available.

Crowdfunding

This online way to find investors has become very popular in recent years. Using one of the many platforms, you can put out your business vision to a very large number of individuals, who can either lend money or invest in the equity of your business.

Angels

Rather than seek a large number of small investments through crowdfunding, you could try to reach a smaller number of individuals with significant funds to invest. They often operate through groups, and your local chamber of commerce may be able to put you in touch.

Small Business Administration 

The government is committed to creating a good environment for small businesses, so you may qualify for an SBA loan. These are targeted at particular areas, and it is well worth researching whether you are eligible.

Explore the Ground

There are many avenues to raise cash to get a new business off the ground. By getting to the stage of needing startup money, you have already demonstrated resolution and commitment. You need to draw on that same resolution to nail the deal that is right for you.

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Small Business Loans: A Miniguide for First Time Applicants

If you are launching a new business or trying to grow an existing small venture there is a good chance that you will need to apply for some funding to help you fulfill your plans and ambitions.

Applying for a small business loan can be daunting and confusing in equal measure, so here are some pointers to help you negotiate your way through the jargon and the various requirements you will normally be asked to satisfy.

It starts with a business plan

You can check here for some details of the loan options available but before you make any sort of application for a business loan you will need to have a few things ready for when you are asked to provide further information to support your application.

Anticipating the sort of data and details that a lender will want will help speed up the process and will also show that you are organized and on the ball.

The standard procedure for making a business loan application is to provide supporting documentation that demonstrates why you need the money and how you are going to repay the amount borrowed.

Your business plan should include a comprehensive set of projected financial statements, which should include profit and loss figures, a cash flow projection and an up to date balance sheet.

If you are unsure how to put all these figures together or need some help, it would be a good idea to use an accountant so that the data is accurate and credible, which is vital to the success of your application.

Expect a grilling

It would be fair to say that lenders are very thorough and stringent with their loan application checking process so be prepared for plenty of additional questions and requests for further information.

You should not take these higher expectations and additional questions as a negative, in fact, it shows that they are taking your loan application seriously and are trying to tick all the boxes so that they can lend you the money.

Collateral requirements

The strength of your credit profile and your business proposal can influence how much security your lender requires which means they might ask for collateral in return for granting the loan.

Some loan programs do not require any collateral and if you are asking for a smaller amount it might not be considered necessary. If you don’t want to risk your home or business ownership by offering collateral, you might be able to get a business loan for the amount you need but it will probably limit your choice of lenders and options.

Check your credit score

It is always a good idea to keep track of your current credit score and know what existing lenders and finance providers are saying about you and your payment history.

You will need to have a good clean credit file if you are going to get the best loan rates offered to you, as your risk profile is adversely affected by bad credit.

Make sure you check your file before you apply so that you have a good idea of how successful you might be with your loan application.

Lenders are often willing to try and guide you through the process so if there is anything you don’t understand or want to question, don’t feel like you are unable to ask, as it is important to get everything right.

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