Startup Financing for Small Businesses
It is never been very easy to obtain financing for small businesses. The credit crunch that began with the mortgages has now spread to consumer and small business loans. It should be no surprise to small business operators that banks have tightened up their lending requirements.
Small business owners now have to become more creative in obtaining financing for their business venture. They now have to look for alternatives.
Borrow from Yourself
All though I have never advocated that business owners should borrow from their retirement funds to finance a business start up. However, in difficult credit times this may be an option for you to best use your savings to finance your business.
Take inventory of all your assets and consider liquidating some of your assets. You can lend the money to your business and then pay yourself back later when your business has positive cash flow.
Borrow from your Family and Friends
Financing from family and friends has been one of the best ways to arrange start up financing for businesses. Generally these loans are cheaper and more forgiving with repayment terms. Perhaps you can arrange a loan from your parents for no interest and deferred payments giving you time to build up cash flow with your business before you have to start paying them back.
Friends may lend you money at a rate higher than what they are receiving in their saving account. Generally interest rates from family and friends would be 1 to 2 per cent lower than the bank would lend you the money for.
Try not to have to give up equity in your company to family and friends for consideration of the loan. You will end up doing the work and they will get a portion of the profit.
Enter "person to person loan" into a search engine and you will be directed to online loan companies that borrowers can ask for funds. The lenders get a good return for making the loan. Yes the interest rate will be higher but it is a good way for entrepreneurs to find start up financing.
Ebay is a great place to sell items for a profit. For example I heard of one entrepreneur raise start up money by selling designer purses purchased at wholesale on Ebay.
Personal items such as jewelry, collections of baseball cards, guns, and antiques could be pawned or sold to raise the funding required to start up your small business.