When it comes to business financing, there are plenty of options for emerging entrepreneurs, and each one has its own set of pros and cons. Know what they are to help you determine the best financing for your startup, because your great idea will not turn into a reality if you do not have the cash flow to get it off the ground. Here are some business funding options for emerging entrepreneurs.
Angel Investors
Private investors willing to front money to aspiring entrepreneurs are called “angel investors.” These lenders have been known to provide business funding as high as $1 million dollars. They’ll want a say on how to manage the business and piece of the action in return for their cash advance.
Crowdfunding
Crowdfunding has become quite the craze. People are crowdfunding everything from business ventures to personal medical expenses. Crowdfunded business financing is generally donated, meaning you shouldn’t have to pay anybody back, and there are websites dedicated to this type of financing.
Family and Friends
Of course, you can ask your family and friends to invest in your business venture and many may be willing to front you the cash. This doesn’t mean this is free money, however. The people giving you the funds may want it paid back with interest, or may want a say and/or stake in your business, just like angel investors.
Financial Institutions
You can always walk into your local bank and see if it will lend you money to start your business. Chances are, however, it won’t. Traditional financial institutions are wary to lend startup funds to any new business venture, unless it is an extension of an already established company.
Grants
Many nonprofit organizations and governments offer entrepreneurs grants to fund their ventures, particularly if the business is women or minority-owned. You might also find grants applicable to your industry, such as research or technology grants offered by nonprofits and already established corporations.
Non-bank Financing
Non-bank or alternative financing is becoming a very popular way for entrepreneurs to fund their emerging business. The cash comes from non-traditional lenders who are willing work with the entrepreneur, even if he or she does not have ideal credit.
This might be the best option for business funding, as the application is usually done online and the loan approved within minutes. The funds are dispersed quickly, and the entrepreneur generally has flexibility in his or her payment plan. In most cases, the non-bank funder will not concern itself with how the cash is used, giving the emerging entrepreneur free rein to use the money how he or she pleases.