Tip of the Day: How Will You Fund Your New Business?

You’re finally ready to put a business plan into practice. Now the only thing standing in the way of the grand opening is the money needed to execute your plan.

There are a wide variety of financing options available for new businesses. When business owners consider applying for a loan, they often think of big financial institutions and banks. But before deciding what’s right for you, it’s important to consider all the options, including non-bank lenders, grants, and other sources.

SBA: The U.S. Small Business Administration offers various loan programs that allow new businesses to get financing. Before applying, business owners should consider whether they are able to qualify for SBA’s loan program. Among other factors, the qualifications are based on whether owners have enough invested equity, or have already invested alternative financial resources, including personal assets, into their businesses.

Friends and Family: Another option is to ask friends and family to invest in your business. On the one hand, being familiar with those you have borrowed from has its advantages. This can increase flexibility in discussing the terms of repayment. On the other hand, there is also the risk that friends or family will have emotional ties to their money. If the business were to ultimately not succeed, this could make social or family gatherings difficult.

Personal Credit or Home Equity: While you could invest your own funds into the business, there are plenty of reasons to keep business and personal assets separate. When personal credit cards are used, the charges can run up quickly. This can bring about a greater risk for late payments, fees, and credit-score penalties. Similarly, when borrowing against home equity, if the business does not perform as planned, there’s a greater risk of losing your home to foreclosure.

Alternative Lenders: Alternative lenders offer many advantages over traditional banks. New business owners often don’t have to fill out stacks of paperwork or produce proof of a lengthy business history to apply. You can fill out a quick application and present three documents to get approval from LoanMe sooner than with traditional lenders.