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10 ways to finance your small business

Oct 24th 2014 at 10:21 PM

10 ways to finance your small business

One of the best things anyone can for themselves is to start their own company. However, there are some pitfalls in doing this. First off, is that not everyone has the fortitude for a startup. For another, starting their own company is frightening for a lot of people. Lastly, capital or initial funding can be a problem.

If you think you have what it takes to start a company, and you have no fears about going on your own, then here are ten ways to finance your small business:

1. Borrow from Family and Friends.

This is usually not something that you might want to do, for any of a number of reasons. However, you don't need a rich grandfather or a favorite aunt, you just need some cash, and any amount will do. Pick the brains of your relatives and they can open their wallet while their at it.

2. Dispose of assets.

There are many types of assets, and that does not only include real estate, but also collectibles, silverware, or any other item that you can sell. These do not have to be big-ticket items; instead these can be things you can sell at a garage sale. There are some businesses which only need a small capital, if yours is one of those then this could be the approach you take.

3. Bank loan.

For those who are serious about starting a business, this is usually the first thing they would do. A bank loan can make use of any available collateral. In some instances you can also ask for a chattel mortgage in buying your office or business equipment.

4. Second mortgage.

If you are still paying for your mortgage, you can apply for a second mortgage on the house. This is an additional loan on top of the unpaid mortgage. Most banks would lend the money to those who have a good payment history on their home mortgage.

5. Presales.

If your business idea centers on an item to sell, you can either start off by selling these items before you start your company. Make these items on your spare time, and use the proceeds as starting capital. Alternatively, you can do presales work on Kick starter to get your business started.

6. Sideline.

Related to pre-selling, is to have a marketable product. You can sell a separate item to fund your main business. This could be a cookie dough business where you supply a Girl Scout troupe the cookie dough they sell for fundraising. This could be a second job, where you work on your spare time, or after office hours.

7. Government Small Business Loan.

These are government backed loans for existing small businesses. As such the loan itself may not be for the new startup. However, it bears knowing how this work. Alternatively, you can have a startup and after a year or two, when you have a steady cash flow, you can apply for an SBA loan.

8. Credit Cards

Using your personal credit cards for business purposes can keep help finances. This is a stopgap measure to keep the business going. However, you have to keep track of the finances, because the credit card charges and interest rates can get very high and costly, very fast.

9. Bank Revolving Lines of Credit.

A revolving line of credit is an amount in the bank which you can use. You are not given the whole amount to withdraw all at one time. Rather you can withdraw some of the money when you need it. The interest you pay is not for the whole amount, rather only for that portion which you withdraw. It is more progressive than an outright loan.

10. Crowdsourcing.

You can try crowdsourcing, or raising funds online. This can be to pre-sell the product you want to develop, or you can sell the idea and have freebies once the company is launched. The freebies are based on the product you are hoping to sell.

Author bio:

Joel is consultant and blogger at that works for Midwest payment processing.  An Level-3 (III) certified Interchange Management Company that specializes in consulting business and EMV credit card processing Cincinnati. Midwest is an industry that prides itself on being leading payment processor from a best in class in technology, as well as, the lowest cost in the industry perspective.

 

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