Funding Your New Business

If you are starting a small company, sometimes there is a need for funding. You can borrow money from your personal assets. You can ask family and friends to assist you. If you prefer other means of funding, you can use factoring, a Loan Guaranty Program, banks, or a leasing company. Additionally, you can use credit cards, customers, and trade credits. You can also use Small Business Investment Centers.

Using Personal Funds

If you have enough money saved up in the bank, and you do not want to have to repay anyone, you can make use of your resources. As soon as the business starts to turn a profit, you can repay yourself. If you have a mortgage, you can take out a home equity line of credit, but you would have to use your house as collateral. If you own stocks, bonds, or mutual funds, you can sell some of the shares to get funds.

Family and Friends

Another option of funding is to ask your parents, siblings, relatives, or friends for a loan. You can also ask if they would like to invest in the firm. You will probably have better luck if you ask them to invest in the business. It will make them feel like they own your company, when in fact; they will own only a portion of it.

Factoring

If you do not want to give up your personal funds or get help from family and friends, you can use the Factoring Marketplace. This is when you sell your invoices or accounts receivable to get funding. The factoring company will own your accounts receivable, so they will bill your customers to recoup the funds that they have paid out to you.

They will also charge you a fee for the service. The cost is relatively high, but some companies are willing to work out a deal with you. You will get more financing if you sell most or all of your accounts receivable. That is how the lender figures out how much money you will get. The volume of invoices determines the amount of money you get.

Loan Guaranty Program

You will obtain this type of financing through the Small Business Administration (SBA). The SBA offers these kinds of loans to small companies that are unable to get funding the conventional way. You can get the loan through a local participating lender – a bank. They offer a Microloan Program. This is a short-term loan for non-profit child-care centers.

Banks

You can get a loan from a bank, but it is not an easy process. They will need to see a history of your firm making money before they risk lending you funds. They want to make sure that you can afford to repay the money. One way to assist you in getting approved is to put together an excellent business plan. You would also have to have collateral to guarantee the loan. A Guarantor or a cosigner would also work out.

Leasing Companies

You can use these companies to finance your computers, office equipment, and phone systems. You can also lease your vehicles. This is an excellent option to lower your start-up cost because you do not have to use your funds to buy equipment.

Credit Cards

Your credit cards would be a great source to fund your organization. Be forewarned that this would be an expensive way to finance your business. You will have to be generating cash to be able to afford to pay back what you owe on a monthly basis.

Customers

If you already have customers, they can pay you in advance for your products or services. In the interim, you can use that money to buy goods or inventory that you will need to sell.

Trade Credits

You can get buy on credit from some of your vendors and suppliers. You are not required to pay the money up front. They will send you a bill. This will give you time to come up with the funds.

Small Business Investment Centers (SBICs)

The centers get licensed and regulated by the SBA. They are privately owned and run by investment management firms. The companies provide venture capitals for start-ups.

In conclusion, types of loans suitable for start-ups include your personal finances, help from family and friends, and factoring. You can also apply for a loan guaranty program, borrow from a bank, and use leasing companies. Moreover, you can make use of the credit cards that you own. Finally, you can use customers, trade credits, and SBICs.