9 Ways To Raise Funds For Your Small Business
When you own a small business and need to expand, chances are you need to borrow money. Sourcing those funds can be tricky. You no longer have a typical weekly paycheck and a secure job to show the bank. In fact, you might be re-investing all your profits and have nothing in your bank account to show for all your hard work yet. There are options for you, though.
1. Micro Loan: The hottest term in lending these days is micro loan. Everybody is doing it from the SBA to international aid organizations. Simply put, a micro loan is a loan in a small denomination that can help a small business owner make an improvement to his or her business, from equipment purchases to computer programs. This fills a need because previously minimum loan amounts were typically five thousand dollars or more. Micro loan are usually between five hundred and fifteen hundred dollars.
2. Factoring: While the word may sound like a confusing math term, factoring is actually pretty simple. When you have unpaid invoices, you can sell them at a discount to another party. Your customer doesn't actually know about the exchange; you simply sign over the customer's check when it does come. The downside, of course, is that you no longer receive the full amount, but sometimes a steady cash flow is more important.
3. SBA Loan: To be clear, the Small Business Administration does not actually loan anyone money. They secure the loan. This means that they assure the traditional lender that if you default on the loan, they will cover any losses. The SBA is a great place to start your search for funding, but they do require good credit and some assets to secure the loan.
4. Family: Chances are you have already asked your friends and family for money when you started your business, but, if you have a good relationship and paid them back in the past, you might be able to use this source again as you expand your growing business. Be sure to put everything in writing to avoid confusion later.
5. Savings: You can tap into any personal savings you have and loan that money to the business. This could include a money market, IRA, or pension fund. Often, you can borrow against those funds or take an early withdrawal, with or without a penalty. Before using the money for your business, be sure to talk over the IRS implications with your tax consultant.
6. Payday Loan: A payday loan from a place like Money 4 You can be a source for your business to use in order to gain access to money for a short term. You simply show them proof of income and borrow a percentage of that money for a short period of time, usually from a week to a month. The interest rates are high, but if you need the money in a hurry, they can do it.
7. Home Equity Loans: If you own a home and have some equity in it, you can withdraw those funds to re-invest in your business. This is a fixed loan with equal payments over a specific period. You can also get a home equity line of credit, which allows you to borrow and return the money, as needed.
8. Crowdfunding: A growing trend is crowdfunding. The newly coined term basically means that a large group of people each fund your business with a small amount of money, say one hundred dollars. The amount is small, but because the number of people is large it adds up fast.
9. Credit Cards: Most credit cards have cash advances. Be sure to read the fine print, however, because the interest rate on cash advances is figured differently than the interest rate on purchases. Some people even play the balance transfer game to get a cash advance moved over to a card with zero interest for an introductory period.
Whichever option or options you choose, know that, with a little research and persistence, finding money to grow your business is something you can do.