Funding Options Business Credit
Starting a business can be a very exciting journey. So is expanding a business for growth. But, to earn big bucks, you have to spend big bucks, too. This money is essential for buying assets and whatever materials your business may need to make a good profit. It’s also vital for marketing and other tasks that will push your business forward and make it bigger, better, and stronger.
When your business doesn’t have the financial resources it needs, you can look to external sources of funding or business credit. But, does it really need to be from a traditional bank? In this article, we’ll tell you some of the top business financing options available to you.
Business credit options to fund your business
Let’s kick things off with probably the most popular business financing option yet – bank loans. After that, we’ll talk about a few of the most popular alternative sources of business funding credit you can take advantage of.
1. Bank loans
When it comes to business funding, the first source that comes to mind will most likely be the traditional banks. However, getting a loan from banks and other traditional lenders can prove to be difficult if you don’t have a strong credit score or collateral, or otherwise fail to meet their loan qualifications. If you are a new entrepreneur just beginning your startup business, it may be hard for you to qualify for bank loans, especially if you have not yet established any business credit.
And, putting your personal assets on the line to get a loan is possible but risky. When you go and borrow funds from the bank, it is also necessary to show them your history of paying back debts. The bank will most likely also want to see your business plan expounding on what you intend to do with the loan, your financial forecast, and how you plan to pay back the due amount.
As you can see, borrowing from a bank requires effort and time that you may not necessarily have. The drawn-out process can be a major obstacle for businesses. Fortunately, when this funding option is challenging or not possible, you can turn your attention to other sources of business financing instead.
2. Business credit cards
Compared to borrowing from a bank, applying for a business credit card is so much easier. The application process is similar to when you’re applying for a personal credit card. However, a business credit card has a higher limit and more features that appeal to business owners. When you apply for one, make sure your personal credit score is at least 670.
On the flip side, however, the amount you can borrow, or your credit limit, is most likely less than what you can loan from a bank. In addition, business credit cards implement high interest rates and fees. Despite these disadvantages, it’s still one of the easiest way businesses can secure funding. In addition, you don’t have to justify your plans for the money, unlike if you were getting a bank loan. Plus, you retain ownership and control over your business.
Experts recommend getting one even you don’t need the money as these credit cards are a great way to build strong credit. But, because they have high interest rates, perhaps stick to small purchases and nothing too grand or expensive.
This is a specific amount of financial assistance or money that the government, nonprofits, and corporations award to a small business. This is valuable funding and you’ll most likely face stiff competition when you apply for one. These grants can be open to all small businesses or only those from a specific industry or demographic.
- Government grants are usually allocated for small businesses of various types at the local, state, and federal levels. For instance, the U.S. Small Business Administration (SBA) provides the Small Business Innovation Research grant to businesses that align with federal research and development objectives and that present a great potential for mass production or commercialization. There’s also the Farmers Market Promotion Program for businesses in the agricultural sector.
- General small business grants provide free capital to startups and are typically offered by government agencies, nonprofits, or large corporations for businesses in specific industries or for a particular group of business owners. Because this is basically free money, you’ll have plenty of competition but a little research could help you land one. An example of this is the U.S. Chamber of Commerce’s Dream Big Awards that recognizes small businesses that made a big impact or contribution on the national economy.
- Industry-specific grants provide financial support to businesses involved in a specific niche or a specialized industry, such as those selling on Etsy, or landscaping, pool services, and other home service businesses.
- Diversity business grants focus on minorities and underrepresented communities. These grants provide not only financial aid to recipients but also mentorship and networking opportunities. Some examples include the Amber Grant Foundation which aims to support women entrepreneurs, the Amazon’s Black Business Accelerator Program which offers financial resources and more to Black sellers on the platform, and the SoGal Foundation’s Black Founder Startup Grant which awards tens of thousands to Black and multiracial women as well as to nonbinary business-minded individuals.
This is the best source of funding for businesses with a product or service that the public and investors find interesting. Crowdfunding allows you to raise enough money or funds from a large group of people to use for certain business projects and/or to launch your new products and services. If you have a great product or service, chances are you’ll even exceed your monetary goal. On the other hand, if your business project doesn’t sit well with consumers, you might not reach your target amount.
Crowdfunding can also be quite time-consuming. You’ll have to spice up your site with information, pictures, and videos about what you’re raising money for and so on. If you want success when you crowdfund, nailing your promotional campaign is critical: A successful promotional campaign equals successful crowdfunding.
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