You have an excellent idea for a small business, as well as plenty of drive and energy.
What you might lack, understandably, is an unlimited bankroll to help you go from simply dreaming about being a small business owner to hosting a grand opening celebration.
Fortunately, there is lots of financial help out there, in the form of several small business loans. To select the best loan for you and your needs, it’s essential to start by looking at a number of the options as well as some of their pros and cons:
Friends and Family
You might not be rolling in dough, but your Great Aunt Edith is, and she has stated on more than one occasion that she would love nothing more than to loan you “a mess o’ money” to help you start your company. While this may seem like a good idea, there are definite caveats to consider, including your well-meaning relative feeling like she can dictate what you sell at your business, and also some potentially hard feelings if you are unable to pay her back timely.
If you do opt for a loan from a friend or family member, create a written contract that includes a promise that you will pay back the amount; this can also help you track the payments andest you have added onto the loan.
Going with a traditional lender for business loans is a solid option for entrepreneurs trying to get small business financing. For example, Zinch offers fast and convenient financial solutions that are user-friendly and flexible. For those who need a significant cash advance to get their startup off the ground, the Zinch Loan offers a lump-sum amount of cash that can be used for a significant investment, and the fixed payment terms are predictable and easy to plan around. If you are tempted to go with a family loan because your FICO score is less than ideal, please know that many financial institutions offer loans for businesses with no credit.
Another way to obtain money to open your small business is through an equity crowdfunding website like Fundify. Unlike a traditional crowdfunding website where people donate money to a cause, equity crowdfunding involves working with investors who will agree to help pay for your small business—as long as they have equity ownership. One benefit of this approach is that it is usually a pretty streamlined process that can help you get needed funding quicker. However, one disadvantage is that these investors may become overly zealous about their ownership status and make suggestions that you do not want or need.
A Cash Back Credit Card
To open your small business, you could also use one or more of your credit cards. If you have a cashback card, such as the Freedom Unlimited Visa from Chase that gives you at least 1.5 percent back on all of your purchases, you will at least get a bit of “free money” in exchange for using it. For example, if you charge $20,000 to this card, you’ll get $300 back, which—while not a massive amount of money—is something you can turn around and use to buy more supplies for your shop. If you are signing up for this type of card, you will typically enjoy zero percent interest for at least several months. Still, then regular interest charges will apply—and on a large amount like that, they will add up fast and make it harder to pay off the balance.
Options Abound, Now Choose What’s Best for You
While having so many small business loan options available is good, some are better than others. Well-meaning yet bossy friends and relatives, over-eager investors,, and interest-heavy credit cards can help you get the funding you need, but with a price—no pun intended. On the other hand, financial institutions offer options and a neutral source of the money you need to fulfill your dream of business ownership.