How to get extra money for your startup business
Whether you’re just taking the first steps towards becoming an entrepreneur or you already have a company, you may want to know how to get extra money for your startup business.
This is among the most common startup questions. Many people want to be business owners and have fantastic ideas; they just don’t know where they’re going to get the capital they need. That’s why we’re breaking down all the options on how to get extra money for your startup business, including the good, the bad and the ugly.
Effective Financing Options
The following options are all solid choices that have worked well for business owners in the past.
Bootstrapping
This is where you finance the business with your own savings. It limits how quickly you can grow, but you also won’t end up paying any interest or risking a larger amount of money than you can realistically afford.
Although the idea of starting a business without risking money is nice, it rarely works out that way. When you look for other financing options, lenders and investors will want to know how much of your own money you’ve put into your business. If you aren’t willing to risk your own money on a venture, why should they?
Being able to save some money to start a business is a good sign that you’re financially responsible enough to start a business. As your business grows, you can reinvest the profits.
Business Loans
A business loan is a great way to get a lump sum of money that you can use for your business. A traditional business loan is difficult to get when you’re starting out, but there are microloans available for smaller amounts with more relaxed lending requirements.
If you have good credit, you can secure a loan with a low annual percentage rate (APR) and pay it off over a term of three years or longer. When the missing link in your business’s success is more money, a loan is a smart move.
Proceed with Caution
The following option can work, but it has its risks.
Business Credit Cards
Because you can earn a return on the money you spend with a business credit card (in the form of reward points), you should use one for your business expenses. However, as a financing option, you could end up paying too much in interest.
A 0-percent APR credit card works well for financing your business if you can pay off the balance within the introductory, 0-percent APR period. These typically last anywhere from six to 15 months.
Stay Away
The following type of financing should be avoided whenever possible.
Short-Term Loans
Whether it’s title loans Texas, payday loans or any of the other short-term loan options on the market, you’re better off choosing any other option or waiting to launch your business.
Short-term loans typically have very high APRs. Combined with the terms, which can be as short as two weeks, it’s far too easy to become trapped in a cycle of debt.
When you’re weighing options on how to get extra money for your startup business, it’s usually smart to begin with bootstrapping. Once your business has been consistently making a profit, look into business loans.
