The world of entrepreneurship is a tough one. Let’s leave aside the process of getting a business off the ground, marketing your products and generating a stable income. Before you even contemplate these entrepreneurial challenges, you need to know how to finance your business.
Depending on what kind of company you launch, you may need a lot of startup capital. Where will you get it? Most people would answer, “a bank.” However, banks receive far more loan requests than they can fulfill. Your application might not get accepted, given most banks’ strict lending criteria. And if you have a less-than-stellar credit score, conventional lending may not be an option for you.
Don’t despair just yet. There are other options that entrepreneurs can check out for financing their business.
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Try Online Lending Companies
Because of online lenders’ negative image, many entrepreneurs refuse to consider online lending as a business financing option. It’s true that you must watch out for scams—but there are many digital lending companies that operate fully above-board. Just make sure to check the lender’s certifications and incorporation documents before providing them with your financial information. Investigating the potential lender will not only give you peace of mind but also open more financing paths for your business.
The biggest benefit of online loans is that they are likely to have less-strict requirements than conventional bank loans. Moreover, online lenders may be able to offer more attractive terms than an ordinary bank.
Go for short-term Business Line of Credit
Like a traditional loan, getting a line of credit is a way to borrow money. Lines of credit differ from traditional loans, however, in that they allow you get pre-approved to borrow a certain amount without committing to taking the money. Interest is only charged when you actually borrow against your credit line. For this reason, a line of credit can be very useful for a startup business—but you’re unlikely to receive one from a bank without a perfect credit score and strong financial performance. The good news is, you can get short-term lines of credit from lending companies. As opposed to usual lines of credit that can last for 10 years, a short-term line of credit only lasts for three or four years, with the debt paid back in monthly installments.
Set up your business with Equipment Loans
An equipment loan is specially designated for purchasing, installing and maintaining the equipment you need for your business. Say, for example, you’re opening a printing press, a gaming café or an innovative eatery. Whichever of these businesses you launch, you’d need various kinds of computers, appliances and machines. An alternative to traditional business loans for these kinds of purchases is a smaller equipment-specific loan. With equipment loans, the amount you can borrow is less than a traditional loan, but the terms may be more attractive.
Tap into Business Credit Cards
Another way to establish your business is with business credit cards. Credit can be used for almost any aspect of financing a business: buying equipment, paying marketing expenses or funding business travel. Not only can you own more than one business credit card, but they may have low introductory rates for the first 12 or 18 months. Make sure to look for other discounts, bonuses and special deals as you shop for cards.
Personal Loans may make sense in certain situations
Using personal loans for business purposes can be risky, as these loans typically have high interest rates. If you really need to borrow money, though, a personal loan may be your best option. In addition to conventional banks, online lenders, peer-to-peer financing companies and local credit unions typically offer personal loans. These providers might also help you come up with other options you may have overlooked while searching for ways to finance your new business.
About Carson Derrow
