You’ve got an idea for something BIG. It’s original, exciting, and guaranteed to shake things up. So what’s holding you back?
You don’t have it, and you know you can’t get your idea off the ground without it. Dipping into your own savings may be a possibility, as is asking friends and family for startup loans. But after those options, the complexities of startup business loans can intimidate even the most savvy of entrepreneurs. If you’re looking for ways to fund your big idea, here are five types of business startup loans that you should consider.
- SBA Loans | The US Small Business Administration (SBA) is an independent federal agency that works to strengthen the American economy by supporting small business entrepreneurship. As small businesses often struggle to secure startup financing, the SBA’s loan programs are worth looking into. SBA backed loans generally feature lower down payments and longer term financing, offering important flexibility to startups that will want to spend more time expanding their businesses and less time repaying their debts. Startup loans from the SBA can also be easier to secure than traditional bank loans. When lending to small businesses, the SBA guarantees a percentage of the loan, which means that companies that might not meet the financial criteria to secure standard startup business loans on their own might be able to obtain a loan through the SBA.
- Microloans | Not all startups need a ton of money to launch their businesses. Sometimes, all it takes is a little bit of cash to get the ball rolling. Microlenders like ACCION and other non-profit, community-based lenders provide loan programs that offer up to $50,000 in startup funding to small businesses in need of working capital, equipment, furniture, or supplies.
- Crowdfunding | When it comes to startup financing, crowdfunding websites have truly changed the nature of the game. By posting their business ideas on sites like Kickstarter and Indiegogo, entrepreneurs can encourage users to back their ventures through either fixed or flexible funding. With fixed funding, campaigns only receive backers’ donations if they meet a specific funding goal, whereas with flexible funding, campaigns collect whatever amount of funding they receive. Entrepreneurs can also employ various tactics to encourage backers to donate to their campaigns. The most common method is to offer perks to backers in exchange for their contribution, thereby incentivizing backers to donate to a given campaign.
- Venture Capital | Startup companies with demonstrated market potential and high rates of return can sometimes attract investment from venture capital firms. The only drawback? By investing in a startup, a venture capital firm assumes a percentage of your company’s equity, which often gives it a strong say in your company’s future business decisions. So while venture firms can connect startup companies with huge sources of capital, it can come at the cost of giving up a degree of ownership of your business.
- Angel Investors | Angel investors are wealthy individuals who offer capital to early stage startup companies in exchange for equity. In this way, angel investing is similar to venture capital financing, except angel investors usually invest in companies that have potential for profitable growth, but are too small to attract the larger levels of funding that venture capital firms can provide. Angel investors sometimes organize in angel networks in order to produce collective research and consultation on startups worthy of investment.
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