The Top 9 Small Business Financing Methods
There are many different ways to secure small business financing. Some of these ways are harder than others, but they can all provide you with the capital you need to make your dreams materialize. If you are ready to finance your small business, read the list below first.
- Bank Loans
Depending on your needs, banks offer a variety of long and short-term business loans. Some of these loans will even cover asset needs and real estate costs. Loans are a great option, but you will need a stable credit and income history for approval.
- Angel Equity
Many entrepreneurs will be forced to sell a stake in the company in order to get it up and running. If this happens, be sure to choose a respected investor who does not impose too many demands.
- Economic Development Organizations
Local economic development organizations are often willing to provide low-interest loans alongside banks. If you do not have the revenue to cover the interest, some of these organizations may be willing to defer your payments.
- Friends and Family
Friends and family members may be willing to loan you money if they believe in your ability to run a business. Furthermore, they may be willing to sell their interest back to you for a negligible amount.
- SBA 7(a) Loans
SBA 7(a) loans are federally-sponsored debt-refinancing loans. They guarantee the lender against a portion of potential losses, and interest rates usually vary according to the loan amount.
If your customers are willing to issue advance payments, you may want to take them up on their offers. A significant portion of successful entrepreneurs funded their operations with customer cash.
- Smart Leases
Smart leases are a commonly overlooked form of small business financing that offers cash to cover inventory costs. If you choose to apply for one of these loans, you should be sure to examine the interest rate first (they can be higher than bank loans).
If you do not have enough money to purchase supplies, vendors may be willing to chip in. If your business plan sounds alluring enough, they may even be willing to contribute cash as well.
- SBIR Grants
Small Business Innovation Research (SBIR) grants can provide you with a way to transform your intellectual property into a business endeavor. This process is fairly extensive since it involves the government.
In short, there are multitudes of ways to secure small business financing. Some of these ways involve the bank and others do not. Just be sure to choose the one that provides you with the best interest rates and terms.