It’s exhilarating finally taking that leap into starting your own business. You’ve got the ideas, the passion, the dreams for what your business will become… But what about the money to put it all into action?
If you’re short on cash to begin your business venture, don’t worry. Fortunately for small businesses, there are plenty of options available to secure the necessary funding. All you need to do is a little careful considering.
There are seven ways you can help get your business off the ground and we’ll cover all of them in this two-part series, but for now, here are the first three.
1) Do Your Research
Before asking anyone for a loan, take the time to get your business finances in order with detailed plans that include your expenses, profits, and projected sales. Create goals for your new business, listing the specifics of what you want to accomplish, how much you’ll need to do so, and what the loan will go towards.
For help crafting the perfect business plan, keep your passion’s optimism firmly rooted in reality, or gain the assistance of a free business mentor from non-profits like Pacific Community Ventures or SCORE.
2) Get a Bank Loan
According to a 2017 study by the U.S. Consumer Financial Protection Bureau, bank loans make up 36% of the estimated $1.4 trillion dollars in small business lending – and for good reason too. For many small businesses, it’s a tried and true way to secure funding with minimal hassle, while online investors are also becoming popular.
If looking to secure a bank loan, search for institutions in your community rather than nationwide brands, as they’ll be more apt to keep local businesses flourishing. Additionally, keep an eye out for those offering loans through the U.S. Small Business Association (SBA), as SBA loans come with greater repayment flexibility and insurance for 85% of loans under $150,000, and 75% for those over $150,000.
Bear in mind, though, that some banks require collateral such as your home to ensure that the loan is paid, and while adding to the risk of a failed investment, it can show confidence in your cause.
3) Use Your Retirement Money
Though a complicated legal procedure, the process called Rollover as a Business Startup (ROBS) lets businesses use their personal retirement savings as a business investment.
Involving switching to a C Corporation that issues stock, owners can then create a 401(k) plan for their business, roll over their own retirement money into that plan, before finally using that retirement to purchase shares for the company that can translate into cash.
As mentioned above, ROBS is extremely complicated and risky if done wrong, so always seek legal advice you trust.
Want more tips on how to fund your small business? Stay tuned for part two, where we’ll discuss the remaining four strategies to help get your startup off the ground!
