If you are a young entrepreneur with an excellent business idea, you need to know your different financing options. Taking out loans is a great way to start, but you […]
If you are a young entrepreneur with an excellent business idea, you need to know your different financing options. Taking out loans is a great way to start, but you must first learn how to get a startup business loan. You can also take advantage of different government programs to finance your business.
Sources of Finance Available to Young Entrepreneurs
One of the biggest problems facing young entrepreneurs is funding. Without capital, you can’t buy inventory and cover payroll and other expenses related to your business operations. But here are some ways you can raise money to pay these bills:
#1. Personal Savings
Many entrepreneurs start by bootstrapping, funding the business with their money, and no help from investors. Most persons wait till they have enough money saved in their bank account before starting their business. But this is rarely enough to cover the entire business expenses.
#2. Love Funding
This is money received from loved ones, like a spouse, parent, family, or friends. It is often borrowed, and you have to pay it back as your business makes a profit. When taking money from loved ones, remember that they give what they have out of trust. So, you should repay the loan on time and not take advantage of the personal relationship.
#3. Government Grants
If you have tried to get a startup business loan and it didn’t work, try applying for government grants. Many agencies provide subsidies and grants that your business may qualify for, but they often have specific requirements. You may check the websites of these government agencies to find the particular programs you are eligible for at the state and federal levels.
#4. Bank Loans
Bank loans are difficult to get, but they are often a tested and trusted option for getting a startup business loan. Banks offer different repayment options, so you may wish to shop around and find a bank that meets your needs. If you have good credit, consider checking your eligibility for a business loan.
You will also need to develop a solid business plan because they want to be sure they can trust you with money. The bank may also require a personal guarantee that you will pay back. So, get your documents together and apply!
While not a very popular means, it is a viable funding source for your business. It involves seeking investments from a pool of investors, especially over the internet. The term is “crowdfunding” because the money comes from a crowd of people. If your business has an excellent public appeal, you may consider tapping into that goodwill and crowdfunding.
Alternative Options to Get Funding for Your Business
Alternative funding is the various ways to raise money for your business without going to traditional banks. Here are some ways your business can raise alternative funding:
- Community Development Finance Institutions (CDFIs)
- Venture Capitalists (VCs)
- Angel Investors
- Peer-to-Peer (P2P) Lending
Tips for Using the Best Financing Option to Grow Your Business
While financing is good for business, knowing how to use the funding to grow a business is critical. Below are three effective ways to grow your business with any financing option:
#1. Technology Investment
Investing in technology can boost your business output. For example, upgrading your computer systems can help you achieve more during work hours. Automating your repetitive tasks is another avenue for growth because it saves you time to work on other things. The more efficient your work processes are, the more you can achieve, and the faster your business grows.
#2. Use Your Business Line of Credit to Improve Inventory Levels
There’s nothing worse than saying no to a customer because you have run out of inventory. That is why you need available capital to refuel and keep your business going. Otherwise, you may limit your growth potential. So, when you take out loans, keep part of it as working capital, to help you save more inventory, hire staff, and pay bills.
#3. Use Real Estate Loans to Buy Property
A quick way to expand your business is to open another location. Think about it, multiple streams of income and a way to reduce the workload on your current site. You can finance a new building through a commercial real estate loan. This type of loan has a repayment period of about 25 years, which is enough time to raise the money.
There are many ways to raise money as a young entrepreneur, but what works for one person may be bad for another. Don’t restrict yourself to a startup business loan; we have reviewed some other options you may consider in funding your business.
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