Starting a business can be costly, especially for those who have no previous experience. So, how can an aspiring small business owner raise the money needed to open their doors? Here are five ways you can raise money to launch your small business now.
1. Bank Loans
Bank loans are the most common ways for small business owners to receive funds necessary to start their businesses. The 7a Loan program is perhaps the most common loan for small business owners to receive. This loan is especially ideal for first time business owners with little or no experience.
Some of the core eligibility requirements for receiving this loan include being a small for-profit business and operating in the US. You also must be able to demonstrate your need for financial assistance and seek alternative financial resources, including personal assets prior to asking for this loan. Anyone who owes money from a previous financial debt will be deemed ineligible. All funds received must be used for sound business purposes.
The 7m or micro loan program is another great option for first time business owners. This loan is ideal for aspiring business owners who don’t have any good credit built up. It also good for those who don’t have much experience with business and who may have been previously denied business financing by larger banks. Small for-profit business and non-profit childcare centers may be eligible for this loan. The funds received from a 7m loan may be used towards the purchase of inventory, supplies, furniture, fixtures, machinery and equipment, but they cannot be used for real estate purposes.
Lastly, small business owners may want to consider 504 loans. 504 loans typically offer larger amounts of money for small businesses to borrow. However, they require a fixed interest rate and can only be used by real estate businesses or to purchase equipment or land. They cannot be used for working capital or inventory. 504 loans may be better for already established small businesses. Brand new businesses will probably benefit more from the 7a loan program.
2. Credit Cards
Credit cards are risky. While they can certainly instill fear in small business owners and create a sense of danger, when used properly they can become a valuable form of financial assistance.
The key to staying out of credit card debt is to only use them when it is absolutely necessary. Also, try not to spend more than you can afford and make sure to pay off any outstanding debts as soon as possible. Credit card debt has the potential to damage your credit score and make it difficult to receive loans in the future, which could severely impact the success of your small business or startup. Credit cards are great for use once in a while, but proceed with caution.
3. Crowdfunding
Crowdfunding is becoming a more popular way to raise money for small businesses and startups. It is easy to get started with crowdfunding, but the amount of success you have depends entirely on how much effort and time you put into it.
If you can get enough people interested, this may be a stress free and easy way to earn some extra cash for your small business. For example, Fundable.com is a crowdfunding website that focuses specifically on small businesses. Users can create a company profile, choose rewards offered for raising “X” amount of money, and promote their cause to generate interest and donations, for $99 a month.
4. Structured Settlements
Many fantasize about winning the lottery and using the money to open their own small business. While instances like this are rare, they still exist. Lottery payouts usually occur in the form of structured settlements. Structured settlements allow lottery winners to receive their payout amounts over the course of several months, rather than all at once.
Structured settlements aren’t strictly for lottery winners, though. They are most commonly given to victims of personal injury. Some examples of these can be cases involving car accidents or medical fault. They typically receive payments over the course of several months or years depending on the amount they are granted.
If you are looking to use structured settlements to finance your small business, you may want to opt into selling it. Selling your structured settlement to a reputable business will help you get all of your cash now, rather than having to save up the partial amounts you receive each month.
The only disadvantage is, often the amount you receive from selling your structured settlement is significantly lower than what you would otherwise receive. If you decide to sell a structured settlement, shop around for the best deal and get quotes before making a final decision.
5. Family and Friends
You can never go wrong with asking friends and family for extra help. Many of them will be proud of your decision to start a business and eager to help. Combine this with your crowdfunding efforts to encourage more donations. Don’t forget to remind them of the rewards you are willing to offer in return for their help.
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