Ways to Fund a Small Business
All small businesses require startup funding. It doesn't matter if you plan to run a small business from your home or rent a storefront, financing is the key to getting started. Financing your business is easier when you have a significant amount of personal money to put towards expenses. Finding the money elsewhere presents a challenge, but several options are available.
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U.S. Small Business Administration (SBA) Guaranteed Loan Programs
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The U.S. Small Business Administration (SBA) is a federal government agency. The SBA assists small businesses within the United States, Guam, Puerto Rico and the U.S. Virgin Islands. Several SBA guaranteed loan programs are available through the agency's network of partner banks and lending institutions. You must inquire about SBA loans when you visit your local bank or other lending institution.
Family and Friends
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You might have personal acquaintances willing to help fund your business. Small business owners often raise money by asking friends, colleagues and family members for assistance. If you convince them that investing in your business is worth it, they are more likely to support your dream. Although this is an informal way to raise funds, CNN Money suggests creating a formal contract to prevent misunderstandings later on.
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Web-Based Lenders
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Entrepreneur.com recommends considering web-based lenders if you have no other options. Some online nonbank lenders, such as prosper.com offer small loans usually in the range of $5,000 to $25,000. Entrepreneur.com goes on to say that these loans are often a good source of funds for people with bad credit. You should compare various sites to check things such as interest rates and repayment terms.
Part-Time Job
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A part-time job is a viable way to raise money for your new business. You can take all of the income from your second job and put it towards your business fund. By doing this, you raise funds for your new business without interfering with your normal income. You can quit the part-time job when you have enough money to start your business.
Credit Cards
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A credit card is a viable option for funding your small business. You wouldn't be the first business owner to rely on credit for the funds you need. The danger is that funding your business with a credit card is risky. If you're not careful, you could end up buried under a pile of debt before your business is operational. Entrepreneur.com recommends replacing the use of credit cards with traditional financing, such as from a bank, as soon as possible. Avoid becoming dependent on credit cards.
Home Equity Loan
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A home equity loan is another viable, but risky option for financing your small business. When you apply for a home equity loan, your home serves as collateral. The amount you can receive depends on the value of your home. On the plus side, you can possibly get all the money you need to finance your business. On the minus side, you could lose your home if you can't repay the loan. You should consider a home equity loan only if you're willing to accept the risk involved.
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