Funding Options for Small Business Startup
If you are a startup and seeking a business loan, it is hard for you to qualify under banks. However, you should not lose hope as several alternate money lenders are willing to finance your startup business. With their help, you can expand your business and buy equipment and infrastructure with success.
What are the popular funding sources for startups in the USA?
The popular funding sources for startups in the USA include asking for funds from family and friends, seeking capital from angel investors and going in for capital ventures. Crowdsourcing is also a popular funding platform for small businesses in the nation. The above means of funding have been tested and tried for many years. However, all new entrepreneurs need to apply for traditional loans for accessing funds for their business.
Banks do not provide loans to startups primarily because they do not have an operation history or sufficient credit scores in the market. If you are a startup and immediately need funds for your business, do not panic. The following are three popular funding options to help you qualify for a loan. They have been outlined below-
1. Financing for your Equipment
There is a loan called equipment financing that helps you get funds for buying equipment. These loans have advantages in the form of financing costs and other interest fees being deducted from the tax you pay under IRS under Section 179. This loan allows startup owners to use the depreciation of the equipment as a tax deduction as well. This loan does not make you wait to receive funds for the purchase of your equipment.
This means you can immediately get money for buying computers, industrial stoves and more. The purchase of this equipment helps you to expand your business. The revenue you earn from this equipment, in turn, helps you to repay the loan. The equipment itself is collateral for the loan you have applied for. Lenders view this equipment as collateral for their loans. This makes them willing to finance your startup without documentation.
If you are a startup and wish to qualify for equipment financing, you should have a credit score of more than 600 along with a revenue of $100,000 per year and have been in business for at least 11 months and more. In case, you have just begun, most lenders for equipment financing will look for a higher credit score. Here, they expect a credit score of at least 680.
2. Credit Cards
Credit cards are issued to both people and businesses. This means if you are a startup company, you can apply for a business credit card for accessing consistent credit. Here, the business gets a maximum credit limit from the lender. Once the business gets the credit card, it can make purchases that reduce the credit limit.
When you make a payment towards your credit card bill, the credit limit increases again. This helps your business to get continued access to funds as and when needed. A credit card for your business has several advantages. The business credit card helps you build credit when you make your payments on time.
3. Maintain a Low Balance
Maintaining the lowest balance possible helps you to improve your business credit. If you have a good credit score, you are able to qualify for more funding options in the future. A business credit card will help you separate business and personal finances. This permits you to manage the budget of your company better. This allows you to manage the taxes of your organization better.
Business credit cards help you to manage the business finances of your company better effectively. An esteemed company in the field of business and funding like NationalDebtRelief says business credit card companies help you to get solid tools to track business spending with the business credit card. If you continue to spend with your credit card, you get cashback options, discounts and sometimes plane tickets for free.
Business credit cards also provide you with valuable rewards. When you sign up for a business credit card, you get a lucrative bonus. Some credit cards give you introductory APRs at zero percent. This lasts for a year or more. You get the chance to fund early operations in the business without paying any finance charges. As long as you pay back the money completely at the end of the period.
If you examine business cards in the market, you will find each of them varies with different companies and products. You get great deals like rewards for sign in, attractive APR offers, rewards and more. Even if you are the owner of a startup and you have a low credit score, you will find many business credit cards existing for your startup business ventures. In case you cannot qualify for a card, opt for the secured business credit card. Here, you need to pay a deposit amount for getting credit. This amount generally is 90% or even more of the total credit available for your business.
Yes, there are special loans available for startup companies. However, when you are applying for these startup loans, ensure you choose them cautiously. These loans give you money at high rates of interest. You need to check the options available in the market. Check the amount of finance you need and calculate the tenure for which you need the loan.
These are some of the salient things you should keep in mind when you are looking for funding options for your startup business. You should also compare three to four startup loans first before you go in for them. Make sure the amount of repayment is always within your budget. The rates of interest and the fees to pay should be carefully considered.
Therefore, when you are looking for funding options for your business, check out these three options. As the owner of a startup, you must be informed. There are several funding options available for you to expand and grow your business.
Isabella Rossellini is a marketing and communication expert. She also serves as a content developer with many years of experience. She has previously covered an extensive range of topics in her posts, including business and start-ups.