Where to get fund to start a business

You then make fixed monthly payments through the P2P platform, which in turn repays the investors based on the amount each one lent. This relatively new type of lending offers some advantages over traditional bank loans. Borrowers can sometimes score lower interest rates, fewer fees, and greater flexibility. But the basics of lending still apply.

Borrowers must fill out an application and provide financial information that will be assessed by the P2P platform. Your credit score still matters, and affects both your interest rate and loan amount.

These lending platforms report your payments to the credit bureaus as well, so if you default, it does hurt your credit. Instead, the SBA offers a variety of guarantee programs for loans made by qualifying banks, credit unions, and nonprofit lenders. Ask around among banks and credit unions about SBA loan programs , including a few of the following more popular programs. A common means of funding small businesses, entrepreneurs can use these loans to launch a new business or expand an existing business.

Businesses that qualify for a 7 a loan must comply with SBA standards. Not surprisingly, the SBA also does not back loans to businesses that have previously reneged on any other government loan. Other restrictions also apply. Businesses that lend money, are based outside the U. However, the SBA sets caps on the maximum spread a lender can add to the prime rate. That rises to 3. Although SBA-backed 7 a loans are a popular vehicle for small businesses, lenders are much more likely to offer them to existing businesses that have several years of financial paperwork to demonstrate their viability.

Entrepreneurs can use them to finance new equipment, supplies, or inventory, or as working capital for the business. Intermediary lenders typically require personal guarantees from the entrepreneur and some form of collateral. Some borrowers must also take business-training courses in order to qualify for the microloan. Microloans offer a source of funding for many entrepreneurs with weak credit scores or few assets, who would otherwise not qualify for a traditional bank loan or SBA 7 a loan.

Many microloan lenders are community organizations that offer specialized programs for specific demographic groups or industries. This leaves the bank more autonomy to set different rules and underwriting standards, and sometimes means more flexibility or an easier approval process. Unfortunately, that flexibility comes at a cost. Expect to pay higher interest rates for conventional business loans.

Further, these loans often come with shorter terms and lower loan caps. Because the bank assumes all the risk, rather than the government taking on the bulk of it.

If you default, the bank has to eat the loss. Talk to your bank or credit union about all their small-business loan options — then talk to several more banks and small-business lenders.

If you want a business loan, do your homework to find the best possible fit for you and your business. Some entrepreneurs offer equity in their nascent company to attract funding. Many consider this a last resort because they give up not only future profits but often control over their company. Before even considering offering equity in your company, make sure you understand the options and the players involved. Incubators work with new companies, particularly innovative ones with a decent chance at disrupting stale industries.

They help take the founder from a promising business idea to earning revenue. To do that, incubators generally provide access to mentors, coworking space , a network of relevant connections, and support such as legal services or help with intellectual property.

And, of course, money. Many incubators are backed by venture capital firms more on them momentarily , looking for the next unicorn startup. For a good example of an incubator, check out Idealab. See the National Business Incubator Association more ideas. Accelerators work with existing companies that are small but operational. Often accelerators provide seed money in exchange for an equity stake in the company.

Famous accelerators include Y Combinator , the Brandery , and Techstars. To enroll in an incubator or accelerator program, entrepreneurs must complete a lengthy application process. Requirements differ, but the entrepreneur must demonstrate a strong likelihood of success because competition is often fierce. Venture capital VC firms make direct investments in fledgling companies in exchange for equity stakes in the business. Since most VC firms are partnerships investing firm money, they tend to be highly selective and usually invest only in businesses that are already established and have shown the ability to generate profits.

These firms invest in a business with the hope of cashing out their equity stake if the business eventually holds an initial public offering IPO or sells out to a larger existing business. Often VC firms also demand some degree of managerial control over the business as well.

Entrepreneur beware. Strauss notes that competition for VC funding is intense. They generally look for startups that show potential for explosive growth. Although venture capitalists operate as businesses, some well-off individuals also like to invest in startup ventures.

Often these are people who have found success in a particular industry and are looking for new opportunities within that same industry. Lots of companies aim for crowdfunding, so you have to generate a lot of buzz to make it through the overall signal noise.

The Small Business Administration as well as other organizations sometimes offer grants to small businesses that are run by women, minorities, or veterans. Since these are more locally focused, often requiring that a business operates in a particular area in order to enter, they may be less competitive. They are also a great way to practice your pitch for other investors.

You could invest a lot of time into your business plan and investor presentation, but not be chosen for one of the prizes. Spend some time getting the business off the ground and building through the early, difficult phases with the solidity of your job paying your bills.

This lets you build your business with fewer compromises, and lets you stay true to your vision without needing to give in to financial pressure. You can also get a great experience from your day job to help you run your company down the road.

You might also be unable to devote the necessary time and energy to really engage with the project and get it off the ground. Margarita Hakobyan is a businesswoman and an entrepreneur that is addicted to creating. Graduated with bachelor's degree from the University of Utah with a concentration in International Studies and a Masters Degree also from the University of Utah with a degree in International Business.

Founder of MoversCorp. We use cookies to ensure that we give you the best experience on our website. By continuing your visit on the website, you consent to the use of the cookies.

If you want to find out more about the cookies we use, you can access our Privacy Policy. Friends and Family Borrowing money from friends and family is a classic way to start a business. Turning your thermostat down a degree or two during the heating season and turning it up a degree or two when you have the air conditioning cranking away will save you significant amounts of money during the year. By reducing impulse buying and purchases of non-essential items, you can save even more.

Use a credit card. Using a credit card — if you have good credit — is the easiest way to get money to start a business. Equipment, suppliers, advertising and postage for mailings can all be purchased with a credit card. And if your credit card gives you a line of credit, you can give yourself an instant loan up to your credit limit.

But using a credit card to start your business bears some significant risk, too. Start part-time. If you need a steady source of income to meet your financial obligations and keep your family covered by health insurance start the business as a part-time venture. Get a part-time job. Put the part-time income aside until you save enough to launch the business Start the business from home. While you may not want to advertise the fact that you work from home, you will have plenty of company.

To minimize your need for startup funding , buy as little inventory as possible until you see how fast the inventory actually sells. Depending on what you plan to sell, you may be able to use a drop shipper to manufacturer your product on demand and ship it directly to your customers. There are a number of drop ship companies, for instance, that will print your custom designs on tshirts, coffee mugs, smartphone cases and other items as they are ordered, then ship them to your customer under your business name.

Using one of them can provide you an inexpensive way to test and sell products. If you have some other type of product in mind, check with manufacturers to see if they will drop ship for you.

Once you know what sells best, then you can see if stocking inventory and shipping it yourself would be more cost effective. Get advance commitments for work. To bring in startup money, line up one or two sources of business before you take the plunge.

Former employers, if you left on good terms, are often a source of start-up work, or sometimes funding. Rent equipment and tools needed for your business instead of buying them. There are places to rent everything from power tools to backhoes. Then, when the business has cash coming in, buy only those items the business uses regularly.