When you have a brilliant business idea, there may be only one thing that can slow you down and that is lack of funding.
After all, you need the capital to purchase or rent a location, buy equipment and supplies, and pay for ongoing costs such as utilities and payroll. As the initial and ongoing costs for any business can often be expensive, it can be challenging to know what to do or where to find enough funds. In this article, you will learn the 5 best ways a start-up business can raise funding and the 5 top-rated online business lenders today.
5 Best Ways to Fund a Start-Up Business
There are many ways to fund a start-up business including small business loans, startup incubators, angel investors, venture capitalists, and crowdfunding.
Small Business Loans
A small business loan may be the best way to start your business while remaining in complete control of its organization and management. Federal small business loans are specific types of loans that are backed or insured by the U.S. Small Business Administration under the federal government. Typically, when a loan is backed by the government, it is easier to apply for and receive the loan. They may have a lower interest rate than personal loans or bank-issued business loans, a higher maximum threshold of available financing, yet more restrictions concerning how you can spend the funds.
If you have an adequate credit score and stable income history, you may qualify for a business startup loan, a conventional business loan, or a business line of credit from a bank. In most cases, a bank will secure the loan with your personal assets or the business itself meaning if you do not repay the loan, they will take the assets as a form of repayment.
A startup incubator is a way to get a start-up business off the ground with several other startup businesses. Typically, businesses will work in a shared work environment, and receive numerous benefits such as mentorships, networking and connection opportunities, and seed funding. Although it can be difficult to be accepted into a startup incubator, the available resources as well as the potential funding can be worth the try.
An angel investor is an individual who invests a small amount of funds in a startup business for equity interest, or an ownership share in the business. They expect return of investment, management roles, or decision-making roles in return for their investment. If you are interested in finding an angel investor, you may be able to find one through other entrepreneurs, startup incubators, angel investor networks, or investment banks.
A venture capitalist can invest a significant amount of money into a startup company, as they can draw from large pools of funds like corporations and foundations. They have a large stake in your company’s success so they will offer expertise and resources during your development stages for growth stages. If you are interested in receiving help from a venture capitalist, it is a good idea to invest in legal and finance counsel to ensure your contracts are full proof.
Crowdfunding is a popular way of finding investors and raising money to fund a startup. It is accessible to most individuals as you can easily set up crowdfunding through social media, or crowdfunding sites such as Kickstarter, GoFundMe, SeedInvest, or Indiegogo. All you need to do is explain your business idea, approach, or plan, and people from all over the world will be able to donate to your idea.
5 Top Online Business Lenders
It can be a daunting task to search for the best online business lenders, coupled with all the other important work you need to complete for your startup business. Fortunately, this guide covers the top online business lenders for your convenience. Follow along below to find out more about each lender.
BlueVine is a well-known online lender offering banking and financing to startup, small, and medium-sized businesses across the United States. They provide loans and lines of credit up to $250,000 which can be a significant help in the early phases of a business or during growth periods. Moreover, they have a simple and quick application process without waiting weeks for your application to finalize. One of their largest advantages is they can provide loans for those with poor credit, starting at a score of 550.
FundBox is an established company providing financing and cash flow solutions for small businesses. Their loans reach up to $150, 00 and have a relatively low minimum credit score requirement of 600. Uniquely, they have no prepayment penalties which can be beneficial for many businesses who experience success quickly. Moreover, they have an easy payment system built into their platform, FlexPay, which gives you the ability to pay your business expenses and receive a grace period for your loan repayments.
Kiva is a non-profit company aimed at providing startup funding for entrepreneurs with low incomes and low credit scores. They do not have an annual revenue or credit score requirement. Kiva takes care of your application, makes it easy for people from around the world to provide a loan towards your company starting at $25, and processes repayments towards lenders.
Funding Circle is a worldwide lender where businesses can lend directly to small, startup businesses. They review applications, approve businesses, pay out loans, and process repayments to lenders quickly and efficiently. They require a high credit score of at least 660, but they can issue a loan of up to $500,000 within the span of a few days.
Pipe is a unique financing platform that allows businesses to sell their future revenue for immediate capital. Unlike angel investors and venture capitalists who typically require equity interest from your company, there are no equity implications through Pipe. If you have recurring revenue streams, you can easily connect your financial streams and trade them with investors. Your potential investor will be able to see the annualized value of the specific financial stream, and they can purchase that revenue stream as a contract. Essentially, you can cash in on your monthly, quarterly, or annual revenue upfront.