Business finance for small start ups is something that you will need no matter what kind of business you take up. Setting up a small company is no child’s play and there will be many hurdles that will riddle your path.
One of the biggest hurdles that most startups face is the lack of capital or finance. There are numerous expenses that come into play here. Infrastructure, inventory, salaries as well as other operational and incidental costs are those that will have to be accounted for.
There are various sources that you can tap for that much needed finance. Let’s look at some of them and also understand what their pros and cons are:
Personal Savings- This is often the most common source when anyone is looking for business finance small start up options. The one major advantage of utilizing your own money is that you save on interest. There will be no creditors and no one will hound you for repayment in case of delays or failed plans. Unfortunately, very few people have enough of a dispensable income that can be used freely for a business.
Business Loans- Banks provide finance for real estate, equipment as well as vehicles. These are generally short-term ones and collateral will be necessary. You will also have to factor in the cost of a loan origination fee and interest. Banks offer fixed as well as variable interest loans. Apart from banks, there are other financial institutions that may also provide more accommodating loans. You will need to submit various documents such as bank statements, tax returns and credit history amongst other things.
SBA loans- In the event that you don’t qualify for a regular loan, Small Business Administration (SBA) loans are an option for you. There are certain criteria that you will have to meet in order to be eligible for this kind of a loan.
Your business will have to be an owner-operated one, for profit and operate as a sole proprietorship, professional partnership or corporation. There are organization size restrictions as well. These loans are backed by the government, the payments are lower and can be paid over a longer period of time.
Credit Cards- These are good business finance small start up options. It is possible to use a personal or a business credit card to pay for the startup costs. However, paying your credit card bills on time is critical as the interest rates that credit card companies charge can sometimes be very high. These can actually throw your finances out of gear. In some cases, you might end up getting a card via an introductory offer at a 0% interest rate. This is something that will definitely be a boon.
Apart from all the options mentioned above, a business line of credit is another option. You may want to consider borrowing from family or close friends though it is not really advisable to mix personal relationships with business.
The only real problem with this option is that if you suffer major losses in your business and you find at some point that you are unable to repay the money, it could eventually lead to a lot of bitterness and it can strain the relationship. You have to be very careful if you decide to explore this avenue for getting financial help for your small business start up.
Venture capital or a moneyed business partner is another option. What you eventually opt for will depend largely on the size of your business and the exact amount of capital that you need to get started. Look at and consider every option carefully, think objectively and prudently before actually settling for any one of the business finance small start up options.
I know it’s not easy but there are ways that you can get the necessary finance that you need to get your small business off the ground. If you have exhausted all known avenues and are looking for other options that you can explore, send me an email and I will help point you in the right direction.