Owning a business is sometimes considered part of the quintessential American Dream. Every year, more than 600,000 new businesses open in the US, and the United States has harbored a business-friendly culture since its inception.
However, starting a business takes a lot of money, and many would-be entrepreneurs have trouble finding funding. Thankfully, there are several places that budding entrepreneurs can go to finance their business projects. So today, Michael Eisenga is here to explain eight sources of funding for businesses.
1. Bank Loans
Bank loans are the traditional way to get business funding. Unfortunately, they may not always be the best option for a small business. While it is certainly possible to secure small business funding from a traditional bank, you need to have a rock-solid business plan and financial statements.
Savings are another potential source of funding. If you have ample money saved up through thrifty spending or good investment decisions, you can tap into those reserves to get some startup capital. It’s important not to drain all of your savings, though.
3. Government Grant
The federal government can also help rustle up small business funds. The Small Business Association (SBA) has offices worldwide that provide grants, business plan consulting, and more. The SBA also offers special grants to business owners who face unique challenges and barriers, such as minority-owned businesses, veteran-owned businesses, and women-owned businesses.
4. Venture Capital and Angel Investors
Angel investors and venture capitalists are wealthy individuals who habitually fund small startups, generally for a share of the equity. Angel investors are more common in the tech industry and other high-growth industries. Angel investors are private investors, and the SBA has programs to match business owners with individual investors.
Crowdfunding is a relatively new business funding model that involves receiving small donations from pledges from regular people. Platforms like Kickstarter and IndieGoGo allow people to showcase their products and get funding from individuals.
6. Personal Loans
Personal loans could refer to money borrowed from friends or family. If you plan to borrow, make sure that you put the terms in writing, so everyone is on the same page about payment.
7. Credit Cards
Credit cards are a viable option for business funding, but it comes with some risks. Credit cards have high-interest rates, and if your business fails, you will be stuck with high-interest debt.
8. Corporate Funding
Like venture capitalists, some larger companies offer programs supporting small businesses, such as Goldman Sachs. Also, the SBA has a handy sheet of ideas on how to start a functioning business.
Struggling to find business funding is an issue of the past. With information like this, almost anyone can secure funding one way or another.