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5 Funding Options for Small Business

Written by Posted On Wednesday, 14 February 2018 19:53

When you are first starting your business, one of your primary concerns is money, and rightfully so. Funding is hard to come by, and at first revenue can be sporadic at best. But getting funding is a challenge. In order to get funding, you need to have time in business and revenue.

On the other hand, to get revenue, you need funding for things like marketing, equipment, payroll, and other expenses. How do you get funding for your small business? Here are a few sources, and the pros and cons of each.

Business Credit Cards

While you certainly don’t want to make a habit of living on credit, you can certainly apply for business credit cards, and usually get them pretty early in your business journey. Of course, part of this will be determined by your personal credit score as well.

Still, a business credit card, even one with a smaller limit, can be a good way to establish your business credit score, and can offer you some funding when you need it. The caution is to use the card only when necessary and avoid carrying a balance because of the interest you will pay.

A credit card should be only used for essential business purchases and emergencies and not generally for day to day operations. Whenever possible, the balance should be paid off monthly.

Some business credit cards offer points and rewards programs as well, and those can offer some additional benefits to your business as well.

Business Line of Credit

A business line of credit is kind of like a credit card. You qualify for a loan of a certain amount of money, but you are only charged on the amount you actually take out of that loan amount.

Typically, you will need to have been in business for at least six months and have an annual income of around $25,000 to qualify. Banks and other financial institutions usually require longer times in business and more income but offer higher loan amounts and lower interest rates than their online counterparts.

Still, when used properly, a business line of credit can provide you with working capital when you need it to smooth out the spikes in income and revenue that you will experience during the early days of your business.

Used wisely, a business line of credit can be a great option for your small business.

Small Business Loan

Even when you are just starting out, there are options for a small business loan from various sources. They often require that you have a strong credit score, the projection of steady revenue, a good business and marketing plan, and a lot of documentation.

If you are in need of a startup loan, you can approach banks, programs through the Small Business Administration (SBA), angel investors or venture capitalists, and more. The thing to be careful of is the interest rate and terms, which will define your payments. Just make sure that your projected revenue will enable you to meet these terms and payments.

Sometimes you can secure business loans with property your business owns or even your personal property. This is a risk, as the lender can seize the property should you fail to pay, but it can help you get a loan when you might not otherwise qualify.

Grants

For some small businesses, you might be able to get a grant. Sometimes these are offered for women or minority owned businesses, or businesses started in areas where cities or states are trying to spark development.

Be sure to check with local networking groups, the local Chamber of Commerce, the area Better Business Bureau, and the Small Business Administration along with community organizations to see what is available. For some communities, you can simply Google available business grants and find out what’s available.

The biggest advantage to grants is that you don’t have to pay them back, but they are usually issued for a single purpose, and don’t provide any ongoing funding as your needs evolve. Still, they are a worthwhile option when you are just getting started to attempting to grow in a certain area.

PayPal Working Capital

For some businesses, especially those that provide services or sell items online, PayPal working capital may be an option for them. If you get paid through PayPal and have a business account, you are eligible to apply.

The application process involves an evaluation of your business and the money that you make through PayPal. You get an offer for a certain amount of money, and instead of ongoing interest, there is a one-time loan fee if you qualify. Depending on the amount of money you receive, you pay back the loan with a percentage of your sales or invoices, up to 30%.

While there is a minimum payment, usually your sales are enough to cover that and more, and you can pay off the loan quickly. This can be a great way to get that new computer without financing it elsewhere, or having money at your disposal, much like a business line of credit or any other loan.

While you should use this wisely, the most effective way is to only borrow what you need and spend the money on the intended item or purpose like marketing or increasing payroll.

No matter what your business looks like, you will need money to operate, especially when you are just getting started. Use these 5 funding methods to guide your early financial decisions and your business will be both profitable and successful.

Listing Additional Info

  • State: California
  • Address: Avlon Park
  • City: Avlon
  • Zipcode: 08242
  • SOLD: no
  • MLS #: 4421536985
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