Effective Ways to Finance a New Business Venture
By Eric Hamilton
Oct 24, 2019 11:57 PM EDT
Oct 24, 2019 11:57 PM EDT
Effective Ways to Finance a New Business Venture(Effective Ways to Finance a New Business Venture) (Credit: Getty Image)
You have an awesome idea for a new business; an idea that you know will benefit your target audience and will really take off once you launch it. There's just one problem: you need funding to get your idea off the ground.
Even in the best economy, finding the funding for a new business venture can be challenging. Sure, you could apply for a loan, but that means giving up a certain amount of control over your company; if you qualify for financing, that is. Ever since the stock market crash of 2008, lenders have really tightened their reigns and set stringent requirements for borrowers; specifically for small business loans.
Whether you aren't keen on the idea of relinquishing control of your business or you just don't think you'll meet eligibility requirements for a loan, you may be thinking of ways that you can fund your new venture on your own. But like many hopeful small business owners, going the bootstrapping route may not be a possibility. If you don't have the existing resources to self-fund your business, it doesn't mean you have to shelve your idea. Here's a look at some effective ways that you can access the funds you need to get your new business up and running.
If you're a homeowner, your house could be the key to financing your venture. Generally, when property owners take out home equity loans, they put the money back into their houses by making upgrades or repairs; however, there's nothing saying that's what you have to use it for. You can use the money for whatever you want; a dream vacation, a shopping spree, a nest egg - or a new business.
Typically, the interest rates are lower than standard loans and the payments are pretty flexible. So, why not use the money you've earned from the purchase of a home to fund your new business venture?
Don't own a home but own a car? Or, do you own both a home and a car need more funding for your business than a home equity line of credit will offer? Either way, a car title loan can provide you with a portion of the capital you need.
Generally, the requirements for a car title loan are pretty minimal, and like home equity loans, the payments are usually flexible. Another benefit: if you work with a reputable lender, you can get the cash you need really fast; in many cases, an application can be processed and approved in less than an hour and you can have the cash in your hand in a day.
Depending on the nature of your organization, your background - or both - you may qualify for a grant. The Small Business Association (SBA) offers federal grants for businesses in certain fields and for entrepreneurs that have certain backgrounds; veterans and the disabled, for example.
Grants are free money, which means that if you qualify, you won't have to repay the funds you receive. However, do make sure you read the fine print, as you may need to give up some ownership rights.
Lastly, you could always turn to friends and family to help you get your business up and running. If a trusted friend or family member has money to spare, consider pitching your idea and asking if they'd consider supporting your cause. To sweeten the deal, suggest a percentage of ownership to the resource (if sharing ownership is OK with you); but, if you do offer this option, keep in mind that you may have to consider the ideas of your new business partner.
By asking a friend or family member to fund your business, you may get really lucky and score a low-interest - or better yet, no-interest - loan. To boot, your loved one might be willing to adjust the payment schedule to suit your specific needs.
Finding the resources to fund a new business venture can seem like a daunting task. Don't give up hope! The above-mentioned financing ideas could turn your entrepreneurial dreams into a reality.
While not an ideal situation to be in, you do have the possibility of surrendering your life insurance and obtaining cash from your policy. Unlike borrowing from your policy, this essentially liquidates it, and negates any death benefits you were previously entitled to. There are additional fees associated with this, and you should always consult a CPA so you can understand any tax implications as well.
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