There are many ways to fund your business. The right type of funding will make or break your business. Today, only 40% of small businesses are profitable, with 30% continually losing money. There are many reasons for this, but if you secure funding the right way it can increase your chances of being profitable.
With so many ways to fund your business, we’re going to discuss the options available to you.
Personal Funding
Obviously, the best way to fund your business is by yourself. If you already have the necessary capital to get your business off the ground, you don’t need to worry about paying anyone back or giving away a share of your new business.
Of course, you shouldn’t be remortgaging your house or selling your car to do it. Entrepreneurs that have some savings in the bank are in the best possible position.
Bank Loans
Small businesses don’t have a high chance of securing capital through big banks. Only 26.9% of small businesses were approved for loans from big banks as of November 2018.
The problem with big banks is the applications are complex and it can take months to receive a final decision. This puts your business on hold for a loan application that likely won’t be approved anyway. Furthermore, big banks typically don’t offer much support when it comes to mentoring.
If you do get approved, you get the money and nothing more. And remember you may have had to put your personal assets up as collateral. It’s a high-risk game.
Private Business Financing
Did you know that 30% of small businesses close because their owners run out of money? You can’t simply replenish your personal savings or ask for more money from a big bank. Larger organizations have little sympathy and flexibility when it comes to small businesses.
Many private business financing companies, like Thinking Capital, allow you to get a no obligation quote within a matter of minutes. They typically offer great rates and they’re experts in dealing with small businesses. Your bank manager isn’t.
There’s also a much higher chance of approval. Plus, you can borrow smaller amounts and gradually take out larger loans as your business grows.
It’s simply a better type of financing.
Crowdfunding and Other Community Orientated Methods of Funding
If you have the sort of business that can secure crowdfunding, you’re good. The problem is most traditional businesses are rarely going to get the funding they need. Asking a community of small investors to invest typically only works for more gimmicky businesses.
This is a type of funding that can take up most of your time. Many businessowners who choose to pursue funding this way spend a huge amount of their time chasing investors, rather than running their businesses.
Last Word – What’s the Right Way to Secure Funding?
It depends on your situation. However, you shouldn’t be forced to secure your personal assets against a loan. Additionally, you shouldn’t be spending most of your day consulting with investors. You should be running your business.
The answer is to always compare different lenders to ensure you’re getting the best rate possible.
Have you tried to secure funding for a small business before?
