Financing a Business - What Are Your Options?
If you want start your own business or expand an existing small business, you must prepare sufficient funds. In this post, we present different financing options that you may consider when in need of business financing:
Bank Loans. This is the traditional way of financing a business. When you apply for a bank loan, you can get reasonable interest rates with long term repayment. Nonetheless, getting approved can also be a challenge especially if you are a start-up business with no business credit history. Also, many banks offer secured business loans which means the borrower must submit collateral.
Government Loans. A business owner can also seek assistance from the government through the Small Business Administration. Check out the SBA’s to see the available loan programs and how you can qualify.
Family and Friends. Borrowing funds from friends or family members is another business financing idea worth considering. In fact, this may be the best way to get financed at the lowest rate and easy repayment terms. One word of caution before taking this step: be sure to create written agreement, stipulating all the terms of the loan, signed up by all parties involved. This can save your personal relationships from conflicts or misunderstandings later on.
Home Equity Loan. A Home Equity Loan or HELOC gives you the chance to enjoy a line of credit that you can use any time you need funds for your business. This way, there is no need to submit a loan application each time. Nevertheless, there is a downside to this option as it puts your property on the line. If you fail to keep up with your loan payments, you can actually lose your home to your bank or lending company.
Business Credit Cards. What about credit cards for business? This special type of credit card can provide support for a business in need of financing. However, it is not recommended for long-term financing. It is also important to understand that the new CARD law only applies to consumer credit cards, not to business credit cards. For this reason, some privileges such as disputing unauthorized charges may not be enjoyed by business credit cardholders.
Find a Business Partner. Having a business partner is another way to get financial support. However, it would also mean sharing your company, control, and profits with your partner. Choosing the right partner is of course crucial and must be done with care.
Your Retirement Fund. This can be an option but not advisable. Remember that running a business always involves some risks and in case the business doesn’t go as planned, you can lose all the money you saved for your retirement. In addition, if you withdraw funds from your 401k fund or IRA before age 59 ½, you will pay taxes and penalties which makes this form of financing costly.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2011.
Related Article: Borrowing Money To Build Your Business
Click Here for SBA Loan request