For most startups, capital is a major issue. The business idea might be there but in order to get started you need the finances. That’s where most startups, including currently successful companies such as IconJDS.com, struggled.
The problem is often worsened by the fact that most financial institutions are reluctant to extend financial aid to brand-new entrepreneurs. Traditional bank loans are almost inaccessible and although Small Business Administration (SBA) loans might be easier to get, they remain very competitive. In fact, often, the SBA maxes out of its funds forcing borrowers to look elsewhere.
The good news is that even if banks and the SBA might not be able to help, there are several other options out there that are equally reliable. Here are five such business finance options that you can explore;
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In the digital era where everything revolves around the internet, there couldn’t be a better place to start your search than online. Currently, there are two popular online lenders that are excited to finance any startup that shows ambition. These are OnDeck and Kabbage. The application process is quite simple, taking only about an hour to complete. And, within days, you’ll get feedback on whether or not your application has been accepted. This is definitely much better than traditional bank application processes that typically take weeks or even months before you get feedback.
Home equity loans
Home equity simply means the value of your home minus what you owe. If your home is currently valued at $400,000 and you only owe $150,000, then your home equity is ($400,000 – $150,000 = $250,000). Many lenders will be willing to give you a loan based on that equity. The great thing about home equity loans is that they are as flexible as you can get. This makes it a low-cost form of borrowing. However, you must keep in mind that home equity loans put your home on the line.
If you’re confident about your idea, then angel investors might also make a very good option to get finance. Angel investors, as the name suggests, are investors who come in to provide the capital as long as they can be guaranteed a return on their investment. Anyone who knows the stories behind companies such as Yahoo, Google, and Costco will be aware that all these brands were funded by angel investors. The biggest advantage of angel investors is that aside from the funding, they will also provide the much needed investment knowhow.
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The main difference between venture capitalists and angel investors is that venture capitalists prefer to fund ventures that have already taken off as opposed to those that are still ideas on paper. Perhaps, you could also say that the two are different based on how much funding you’re likely to obtain. Of all the business finance options discussed here, venture capitalists are likely to give you the most funding, typically going into the hundreds of thousands or even millions of dollars.
Crowdfunding is also becoming a popular way to raise business capital and for good reason. If you can convince people that your ideas are credible, then within weeks, you could be walking home with a lot of money. There are several crowdfunding platforms that you can turn to with the most popular at the moment being Indiegogo and Kickstarter. While on these platforms, consider giving up a share of your business to the investors who choose to fund your business or give away free products or even rewards.
So, as you can see, you always have plenty of options for finding the finances to start a business. Just make sure that once you get that money, you open a checking account online so that you can easily track and manage those finances.