When you have an idea for a business or a dream of starting something on your own, a major hurdle can be funding. Some businesses may have large startup costs while others may not require much to begin or function, but it’s a reality that not everyone has the access to funds to live out their dream. Fortunately, there are options to consumers for small business financing that can help.
Get a bank loan
The most common way of financing is getting a loan through a bank or lender. You can either go to a brick and mortar bank or even borrow money online. With either method you will need to fill out an application where they can review your financial situation to determine what you are eligible to receive from them. The terms of borrowing their money will be set (amount, rate, etc.) and you will be given the money if you agree to the terms. If you have good credit than this is a great option, though there are many different types of loans out there for everyone.
Credit Cards are very similar to bank loans. You have to fill out an application, get approved and receive terms. Unlike most loans, you don’t receive a lump sum of money. You get an available line of credit and then you can swipe your card for purchases up to that amount. Again, this is all based on your credit score and financial responsibility. The more financially responsible you are, the more money you will be allotted. Credit cards are a good option for startup costs for a small business.
Some individuals may have access to a 401k that they have been contributing to. While most are tempted by the large sum of money, taking out money from a 401k requires you to pay not only capital gains on the withdrawal, but also you may be hit with a penalty fee if you are under the minimum age. The minimum age can be anywhere from 55 ½ to 60. In certain situations, these fees may make sense for you and your business.
There are websites that offer crowd funding for your business ideas. Sites like kickstarter allow people to go online and post their ideas and ask people for money. As an investor you can contribute to these ideas.
If you get funding from an outside source that is not a bank, possibly family, friends, or an investor than this can be called an angel investor. Someone who is an angel for supporting your cause. This can be a good option for those who do not want to deal with a bank or credit card company for one reason or another.
All of these options are great for people who want to start a small business. Basically, your dream can come true. The only thing that is important is that you evaluate your situation to see which one would be best for you.