Four Ways to Finance Your Small Business

There are millions of people in the US and around the world who have a dream of building a small business of their own. There are several aspects to the lifestyle of owning a business that appeal to people, but one of the factors often in the way for entrepreneurs is a lack of financing. Obtaining financing for a small takes a mix of research, determination, organization, and creativity, but it can be done. Here are a few ways that small business owners are finding the dollars they need to get their businesses up and running.

- Personal Savings: It’s rare that an entrepreneur is able to build a small business without having at least some of their own skin in the game. Using your personal savings will add to your commitment to make the business work. If you are thinking of starting a business, one of the steps you should take several months ahead of time is to start building your savings so that you have money available to contribute to your project and to support yourself as your business is getting off the ground.

- Loans: There are several places for a potential small business owner to try to obtain a loan. Walking into a bank and applying for a loan can still work, but it’s much more difficult to qualify than it used to be. The Small Business Administration has resources available to help small business owners find financing and is working harder than ever to support small business owners that have struggled through the recent recession. Friends and family members sometimes have resources and are willing to help and in many cases they will be much more patient in collecting payments.

- Angel Investors: An angel investor is someone with money to invest that enjoys finding startups and small businesses to support from the early stages of the business. They take on a substantial amount of risk because most startups statistically fail within the first three years. An angel investor is valuable because most have assisted in new businesses before and can offer advice and a network of contacts to benefit the business owner. Keep in mind that angel investors will want a meaningful stake in your business and you should make sure you’re not giving up too much for startup financing.

- Credit Cards: Because of the high interest rates associated with credit cards, this should be one of the last options you consider for financing. However, sometimes if you need cash quickly or other potential sources of funding aren’t available, a line of credit is a viable option. If you’re paying a 13% interest rate on the funds you accessed with your credit card though, you will need to be earning a return on your money greater than 13% before you’re operating at a profit.

Popularity: 3% [?]