Are you trying to find the perfect way to fund your online business? Take a look at these financing options that can help you out.
Did you know 69 percent of businesses got started at home?
If you’re thinking about starting an online business, you have to know what financing options are available to you.
Having enough capital will help your online business thrive, so we put together 10 ways to find alternative financing.
Let’s get started.
1. Use Your Personal Savings
If you’re starting your own online business, what better way to finance it than by investing in yourself.
You can use your personal savings to invest in your online business. Even if your personal savings account is not too hefty, you might have the option to withdraw from your 401K. However, keep in mind there might be penalties for withdrawing that money.
There are many perks if you decide to use your savings to invest in your business. On one hand, you won’t need to worry about your credit score. Forget about paying high-interest rates and there’s no risk of losing control over your business.
2. Look into Peer-to-Peer Loans
A peer to peer loan (P2P) is a type a loan that works as an alternative to traditional lending. These types of loans are considered personal loans, but the borrower can use them for a variety of purposes.
In the case of P2P loans, the borrower goes through a lending platform and enters their personal information. The platform then matches the borrower with an investor who will fund the loan.
Unlike lengthy bank loans, P2P loans are fast and easy to obtain once you meet the requirements. Keep in mind if your credit score is low, you might be subjected to high interest rates.
3. Ask Your Friends and Family
Sometimes you will be able to find cash to fund your loan in unlikely places. You should ask your friends and family if they have some cash laying around to invest in your online business.
There are advantages from borrowing money from your family members. For example, they might not penalize you if you pay late or charge you insane interest or fees.
If they don’t have the cash to give you, they might be willing to donate an item of value that you can sell, such as a car or a piece of jewelry.
4. SBA Loan
The Small Business Administration (SBA) helps small businesses secure loans through some lenders. The SBA provides lenders with a guarantee that their money will be secure if the borrower defaults on the loan.
If you qualify to apply for an SBA loan, it might be a great option for you. However, obtaining this loan will require a lot of paperwork.
5. Apply for a Microloan
If you don’t have a strong credit score, it might be challenging to obtain a loan from a traditional bank. A microloan might be what you need if you fall into that category.
Most microloan institutions only lend borrowers between $500 to $35,000. Typical banks don’t even bother loaning amounts that are so small.
There are hundreds of microloan lenders if this is the route you choose to take.
6. Use a Credit Card
A credit card might be a great way to pay for your online business expenses if you want to start small. The great thing about a credit card is that you only have to pay interest on the amount you don’t pay off at the end of the month.
If you pay your entire balance you might never have to pay a cent in interests. There might even be some cards that can offer you with some extra benefits.
However, if you only pay the minimum each month, you will pay a lot of money in interest.
7. Traditional Bank Loan
Of course, you can still go the traditional route and get a bank loan. Before you apply for one of these, you should make sure you fit the requirements.
Traditional bank loans will require you to have a strong credit score to consider you a worthy borrower. If your credit score is on the low side, they might even ask you to provide collateral.
If you don’t believe your credit is strong enough, you might need to secure a co-signer.
You will also be subjected to lots of fees.
8. Try an Online Lender
If you want to start an online business, why not borrow money through an online lender.
Online lenders have become more popular in recent years due to their flexibility. You can apply for these loans and get approved in less than five minutes.
Although they are convenient and easier to obtain, you might still be subjected to a credit check to determine your loan interest rate.
For those who don’t want to go into debt to grow their online business, there’s an alternative route.
Crowdfunding allows you to get funding from individuals who believe in your project. There are sites such as Kickstarter and Indiegogo where you can launch your campaign.
Start your campaign by posting how much money you need over a certain period of time. You can share your campaign with friends, family, or your social media accounts. The more people you reach, the better your chance of collecting all of the money you need for your business.
Crowdfunding is also a low-cost way to do it since they don’t charge a lot of fees.
10. Home Equity Loan
Homeowners have the option of requesting a home equity loan and using the money to invest in their online business. A home equity loan will allow you to borrow the money of the value of your home.
Before you go to a bank to request a home equity loan, you need to make sure there’s not a tax lien placed on your house. Find out more about the consequences of a tax lien.
Financing Options for Your Online Business: The Bottom Line
These financing options will give you an opportunity to get the money you need to grow your online business. All you have to do is figure out which one is right for you.
If you want to learn about the 5 things every entrepreneur needs to succeed, check out this article.