How to Get Money to Start a Small Business

How to get money to start a small business

Starting up a new business is not an easy task for business owners. You should have the resources with you, such as money, building, labor, and assets. Having cash in hand is very important at this stage. 

List Of 13 Ways To Get Money:

Here we are sharing some ways of business funding to start a small business:

1. Savings:

According to ‘Forbes,’ most businessmen utilize their savings when they plan to start a business. You should keep some savings with you for your expenses (groceries, car, bills, etc.) because a new business may take a few months to generate profit. In the case of small businesses, it may take months or a year to generate a profit. So you should manage your expenses accordingly.

Some tips by the Small Business Administration (SBA) for saving money to start a business are:

  • Use credit card debt (call your bank to decrease the interest).
  • Set automatic deductions to your saving account.
  • Set yourself free from the services you do not use (gym or car-sharing membership).
  • Use services like ‘You Need A Budget’ to set up your monthly or annual budget.
  • Go for buying used items (visit social media sites or groups working on trading and selling used items.

2. Microloans:

Microloans are common for those individuals or companies who could not qualify for bank loans or other funds. Different non-profit organizations are working for this purpose. It is common in small and developing nations.

3. Personal Loans:

You can simply borrow a loan from your friends and family. Set some terms on which you can ask for money, such as:

  • The exact amount you want to borrow
  • Due date of payment
  • Interest rate
  • Payments methods

4. Credit Cards:

You can use both personal and business credit cards for starting your new business. You should take care of it and always use a credit card with the least possible interest rate. Using a credit card with a high-interest rate will end you up in great trouble because refunding will become very difficult for you. You can take help from different online sites to choose the right credit card for yourself.

5. Bank Loans:

Many banks are issuing lending money to the owners of small businesses. Some banks complete the investigation process for lending money to ensure the on-time refunding of money by checking the business plans. 

Your bank is the right option in that case, as it already knows your history. The other option is choosing the bank that is famous for lending money to small businesses.

6. Vendor Financing:

It includes financial help from your suppliers. If you are receiving supplies from your vendors and complete the payment within 30 days, you can ask them to extend the due date for payment. It will help you to earn profit from your sales to pay your dues on time. 

7. Government Programs:

There are many government support programs for entrepreneurs who want to set up their businesses and look for financial help. Small Business Administration (SBA) can guide you on available grants and provide training and business consultancy.

The online site, ‘Grants Govt’ has information on more than 1000 federal grant programs.

Some small business grants available are:

Women Business Centers:

It specifically works for women and offers consultancy on local, state, or private loans for economically weak women.

SBA Site:

This site helps small businesses to connect with funding sites or organizations.

Veteran’s Outreach Business Centers:

These centers are working for veterans and help them to get loans for starting their small businesses.

8. Corporate Programs:

Many corporations are working for small businesses. They offer loans at a low-interest rate, which is very helpful for the owners of small businesses. These corporations offer affordable loans to entrepreneurs so that they can refund the money on time.

9. Product Pre-Sales:

If you plan to start a small business but do not have enough cash in hand, you start selling your products in advance and make money to invest in your business. It requires you to gain your customers’ trust; you need to set some terms and conditions for pre-selling the products. It works for you in a way that you already have customers to follow up for future sales.

10. Crowdfunding And Crowdlending:

It includes fundraising from a larger group of people for funds on crowdfunding sites. The funders, in turn, will get the gifts or products you are manufacturing. It works like other funds, but the only difference is that your funders do not expect a refund of their money.

11. Venture Capitalists:

Venture Capitalists are ready to invest money in upcoming projects. They try to help the developing businesses having the potential for high growth and profit. They do expect a return on their money. SBA enables you to connect with investors depending upon the region, industry, and company age.

12. Angel Investors:

Angel investors invest their money in small businesses and share equity in companies. Companies like Yahoo and Google also get their funds from angel investors. You need to register angel investors and related transactions with the Securities And Exchange Commission (SEC).

SBA can help you connect with private investors through the SBIC program. Under this program, investments come in three forms:

Loans:

SBIC loans range from $250,000 to $10 million; Interest rates are 9 to 16 percent.

Equity: 

SBIC will give you money for your business for a share of ownership (and control). Investments range from $100,000 to $5 million.

Loan and Equity: 

It is a combination of the first two options. Loans come with interest rates of 10 to 14 percent, and investments are $250,000 to $10 million.

13. Small Business Administration (SBA):

SBA is actively working for small businesses. It helps this sector to grow as a powerful source for entrepreneurs. It offers different loan options to the owners of small businesses.

Other topics are:

How Can I Start My Own Business With No Money?

Starting up a new business requires resources. If you do not have money for a small business, you should keep these options in your mind:

Service-based Business:

It is very cheap to strat-up a service-based business. It only requires a strong internet connection, and you are ready to go. It has many options for small businesses, such as:

  • Web-designing
  • Software development
  • App development
  • Photography
  • House cleaning
  • Online coaching

All of these and many more are the options available for starting a service-based business.

Dropshipping:

It involves a third party to manage your business. You can sell your products using online platforms like Alibaba, Shopify, Daraz, etc. For that, you need to create your online store on these sites and upload the products with their details. 

The customers visit the site and buy your products online. These online sites manage the payment and shipment themselves.

Work On Demand:

You can use your expertise to provide your services to customers online. If you are a good artist, painter, or writer, you can offer your online services to people and get your payment without any extra effort. You can design pots, mobile phone covers, mugs, cushions, or write content for different pages or sites. You can also make sketches for your clients. There are many options for working on-demand to earn a good amount for yourself. 

Publish A Book:

If you are a good writer and want to sell your writings, you can publish and print your book by taking help from online services like Amazon and Draft2Digital. You can hire people for formatting and designing the cover for your book on Fiver or Freelancer.com.

How Much Does It Cost To Start A Business?

Costs for starting up a new business depend on many factors. If you are setting up an online small business, it won’t cost you too much. If you plan to start a business with multiple investors or owners, it will cost you a heavy amount.

According to the SBA, it costs about $3000 or less to start a small business. These are usually home-based businesses with only one owner.

Starting home-based franchises will cost you between $1000 to $5000. On the other hand, retail franchises may cost you a little more.

How Do I Qualify For A Business Loan? 

Forbes recommends the following requirements for the owner of a small business to qualify for a loan:

Have a good credit score:

You must have a good credit score to apply for a business loan. It is a score on which creditors decide whether to give you credit or not. A high credit score is beneficial in many ways.

Have enough cash to cover outstanding loans:

Your current cash not only covers the prior loans and debts but also covers your latest loan.

Have enough business assets:

If you have plenty of assets (cash, accounts receivable, or money your clients owe), then you have a higher chance to qualify for a business loan.

Have good business experience:

If you are familiar with the business world for a long time and have good terms with other 

companies, banks, or organizations, it will increase your chances of qualifying for a business loan. 

Have correct financial information:

If your business’s financial information, including financial statement, balance sheets, cash flow statement, and income statement, is accurate, you can easily qualify for a business loan. 

How Can I Get a Small Business Loan without Collateral?

If you apply for a loan through SBA, you don’t need collateral ( property or assets like cash). 

SBA can help you connect with the lenders even if you are starting from scratch or new to a business field.

For more useful information browse the resources guide today!

Related Articles: