What`s the best way to finance starting your own business

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You have a great idea, plenty of ambition and you are ready to go into business for yourself. The problem could be that you have more ambition than money. The good news is that there are many ways to finance starting your own business. One of them, of course, is to get a loan, so to compare loans, click here.

Business Funding from Individuals

Good sources for funding a new business include family, friends and business contacts. These people may be willing to grant the advance free of interest. Furthermore, if those individuals become excited about the venture, they may be willing to provide the funds for a small percentage in the business, which may be a better opportunity than having to repay the money.

Along those lines are financial backers known as angel investors. Angel investors are wealthy people who look for small business startups in which to invest. Traditionally, they award funds in exchange for a small percentage of the new company rather than having the owner pay them back.

Personal loans are a good option too. An aspiring owner may be able to take out a home equity loan or a home equity line of credit to start a business. With good credit, an entrepreneur may also be able to take out an unsecured personal installment loan. Additionally, a cash-value life insurance policyholder may be able to borrow money from the equity in their policy to start a business.

Commercial Business Loans

Banks and finance companies are eager to serve startup business owners. So many of them exist and competition is so strong that interest rates and terms may be quite appealing. Of the two, the bank may be tougher because it looks closer at credit, assets, cash flow and backup repayment sources.

A finance company is more likely to overlook those things. If the individual has a good business plan and reasonable cash flow projections, the company sees them as a good prospect. However, it may require that the owner already have a sizeable percentage of the necessary capital, even up to 25 percent.

Small Business Administration Loans

The Small Business Administration (SBA) is much like the Student Loan Administration. It does not provide the money, but it does guarantee the repayment. A partner lending institution grants the loan, or under the right conditions, the borrower may be able to choose their own institution from which to borrow. Those conditions include good credit and collateral and that plan is the 7(a) loan program. The SBA also offers microloans, which are loans of $35,000 or less provided by non-profit third parties.

In addition to these ways to finance starting your own business, there is money available through government grants. The federal government offers them, as do most state governments. The grants usually come with conditions the owner must meet, but they may also have great advantages, such as tax benefits. Getting these grants is a long process, so consider them in addition to and after you have explored the other options.