Happy #BusinessTipTuesday! Tomorrow, August 8th, it is National Dollar Day. This day commemorates the establishment of the monetary system in 1786 by Congress. Money makes the world go round and most definitely keeps your business up and running! However, financing can be one of the biggest challenges for entrepreneurs as the process is complicated and most people are unfamiliar with the options. As well, what happens when you are interested in starting a business but do not necessarily have the cash to finance it? Well you are not alone… in 2016 the Small Business Administration (SBA) lent money to over 55,000 businesses! Here are a few choices you may want to consider if you are looking for financing for your small business.
- SBA Loans:The U.S. SBA aids with funding by assuring up to 85% of loans issued by lenders. The three main SBA loan programs let you borrow money for almost any business purpose, whether it be an expansion, adding to your working capital, or equipment purchase and maintenance.
- Term Loans:These are standard loans from a bank, often used to pay for starting/purchasing the business or major investments within the business. A specific amount is borrowed and there are either fixed or floating rates on a specific repayment schedule either monthly or quarterly. As well, term loans can be classified as long term loans or immediate loans.
- Crowdfunding:This type of funding collects money from a large number of people by persuading them to donate to your business by presenting your business idea and what you will be offering. These crowdfunders are not considered investors because their money will not be returned nor do they have any ownership.
- Venture Capital Investors:This type of financing is based on equity instead of debt. The venture capitalist or VC firm provides financing in return for equity stake in the startup, which typically has the potential for strong growth. This type of funding comes with terms and conditions for ownership and management.
- Business Lines of Credit:This is an option similar to a credit card and more for portions of financing, not necessarily to cover the entire thing. It allows access through a lender to a pool of funds that you can pull from when necessary. Interest is only paid on the amount of money used and after payment is made on the borrowed amount, it is refilled to its original amount.
More information can on these financing options can be found here. Determining what options are best for you and your business are tasks that the University of Scranton Small Business Development Center can help with! Request consulting with our center by visiting, www.scrantonsbdc.com.
Danielle Guari
Business Consultant
The University of Scranton
Small Business Development Center
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Artwork adapted from freepik.com
