How To Fund Your Small Business

In recent years, the U.S. economy has improved; creating new opportunities for job-seekers and entrepreneurs alike. In the midst of this upswing, greater availability in small business loans has appeared. Current numbers are indicating a rise in funding and loans as well as borrowing on behalf of small companies.

How To Fund Your Small Business

Change in Conditions Since the Recession

In the past five or six years, the lending climate has warmed and the severity of restrictions placed on small business loans has eased. In 2013, small business borrowing amounted to about $1 trillion. While the climate has improved, many lenders are still not supplying “fast business loans.”

Required Capital or Money to Start-up

It is difficult to place an exact number on how much money or capital is necessary to start your own small business. Some industries require very little overhead due to a small workforce or the ability to telecommute; while other industries require a leased office or retail space as well as staffing. Award-winning entrepreneur Syed Balkhi has some tips for entrepreneurs who don’t want to spend a lot in building a startup.

Wells Fargo previously did a study and estimated the minimum for a start-up was $10,000. A survey by Kauffman Firm, specializing in high tech industries, estimated the lowest amount of introductory capital must be at least $80,000. Creating a business plan is necessary in knowing how large of a loan is required.

Funding Yourself

According to the Kauffman Firm Survey, most small businesses are using their own capital as well as relying on relatives for funding. Funding yourself may require a savings account or zero interest credit cards to get you started. Many other investors will look kindly on a small business when the owner has invested their own assets and savings in the company. Investing in yourself can be a risk with higher consequences but also shows great confidence in your business.

Loans and Credit Cards

Secondary sources of funding are loans and credit cards, as many as 7% of small businesses are dependent on credit cards in their first year of business. It is possible to find low-interest credit cards that offer cash back to small business owners following their first year of business. In order to get a bank backing you it is crucial to have solid business plans, promising projections and your own investments in the game.

Angel Investors

The third largest source of financing for small businesses are “cash infusions” from angel investors. Keep in mind when outsourcing funding to angel investors that they will “own” a chunk of your company and have a say in future decisions. Many small businesses can attract these larger investors by paying back their friends and family as they grow.

Final Thoughts

Striking out on your own can be a leap of faith, but is well worth it for many small business owners. Creating a solid business plan can help exhibit your passion, and investing in yourself shows confidence. If you are lacking credit and unable to get loans there are many options with investors and relatives to help you get started.

Related News

Copyrıght 2014. All RIGHTS RESERVED.