When you decide to start a business, a good portion of your attention will turn to your current financial circumstances. Do you have the money on hand to get your business off the ground? Or do you need to secure a loan? No two entrepreneurs are in the exact same boat, so you should make the decision that’s best for you and your company.
For example, you may find yourself comparing affordable loans online while the next person is interested in applying for a small business credit card. It’s critical that you know your options and then choose the one (or more than one) that is best aligned with your current circumstances and short and long-term goals. Here are five that you should consider:
Personal Loan
A personal loan is an unsecured loan with varying terms, generally ranging from 12 to 84 months. Upon approval, you can request funds and then use them however you best see fit. As an unsecured loan, you’re not required to put up collateral in exchange for the funds. For many entrepreneurs, this greatly increases the odds of approval.
Business Loan
Many local and national lenders offer a variety of small business loan products. Going down this path can benefit you upfront and in the future, as you can rely on the same lender to provide you with financing as your company grows. Business loan terms can vary greatly from lender to lender, so it’s good practice to compare a minimum of three to five options. This will lead you toward the lender with a solid reputation and a loan with competitive terms and conditions.
Credit Card
This can be either a personal credit card or a business credit card. Furthermore, you may find that you need more than one credit card in order to obtain the funds necessary to launch your business. If you already have a personal credit card, it’s the fastest way to access the funds you need. There’s no application process and waiting period. You’re in a position to make purchases today.
Home Equity Loan or Home Equity Line of Credit (HELOC)
As the name implies, a home equity loan allows you to tap into the equity you have in your home in the form of a loan. There are many benefits of a home equity loan, including the ability to secure funds at the best possible rate. On the flip side, a home equity loan means you’re putting your home up as collateral, thus putting it at risk of repossession. If you default, the lender has the ability to repossess your home.
Even if you have some reservations about a home equity loan, compare the details to other types — such as a personal loan — to determine if it’s something to keep on your shortlist.
A Loan From Friends and / or Family
Some people are okay asking friends and/or family for money to start a business, while others would rather stay away from this at all costs. The biggest risk is that you won’t be able to pay back the money according to your terms, which can put a strain on your relationship. As for benefits, there’s no formal application process and you may find someone who is willing to lend you the money without charging interest.
In addition to the options above, review your bank accounts to determine if you have any cash on hand that you can use to fund your startup. For instance, you could tap into your savings account, emergency savings, or retirement account to get some or all of what you need. It’s often best to combine cash with one of the options above.
Final Thoughts
It doesn’t matter if you’re starting a business in the gaming space, financial sector, or another industry, it’s imperative that you have your funding in line before you get too far down the road. This can be the difference between making your mark in your industry and coming up short.
Do you have any experience securing funding for a startup? Were you happy with your approach or did you come up short in a few key areas? Is there anything you would do differently if you had another opportunity?
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