When you decide to start a small business or need small business financing from Lendumo to help expand your existing business, there are a number of ways to go. All methods of financing a business have advantages and disadvantages, often depending on your individual business situation. From raising the money yourself, to loans guaranteed by the Small Business Association to borrowing from friends or family, you should weigh each of your options carefully before deciding how to finance your business’s needs.
Simply put, bootstrapping is when you use your own money to finance your small business, often on a shoestring budget. It’s one of the most popular methods of starting or financing a business, and one of the least expensive. You don’t have to pay interest to anyone you’d otherwise have to borrow money from, and your business’s net worth will be positive right out of the gate. What’s more, you and your business will generally be in a better financial position in the eyes of future lenders should you want to secure more traditional financing down the road.
The downside of bootstrapping for small business financing is that your business will likely be perpetually short of cash. If you don’t have much in the way of funds available, it can really limit what you’re able to do to grow your business.
The Small Business Association (SBA) helps small businesses obtain small business loans. While the SBA does not actually make the loans themselves, they do guarantee them, helping reduce the risk to lenders and encourage them to lend to more businesses at more favorable terms. There are several different loan types offered through the Small Business Association, from disaster recovery loans to micro loans. SBA loans offer ten year terms, and you can blend real estate and business acquisition loans together, which can be quite convenient.
On the downside, the fees associated with SBA loans can be on the high side and the maximum amount you can borrow depends on the SBA’s budget. The program can be shut down completely if there is a lack of funds to guarantee loans. Qualifying for SBA loans requires 2 or 3 years of tax return information, and you’ll need to put up some collateral.
Borrowing from friends and family
Borrowing money from friends or family to finance your business has many advantages, but it can also cause problems you don’t want to deal with. While you may not have to pay interest (or at least not as much as you would pay to a bank or other forms of small business financing resources), if you should have financial difficulties that make it hard to repay the loan, you may find that your relationship with that friend or family member becomes strained. Money can cause problems in even the best of relationships, which is why I don’t recommend it, even if you can obtain favorable terms.
The vehicle would even now fill in as security and the moneylender would in fact possess the vehicle until the credit was paid off. While this choice is generally more slow the vendor financing, it will likewise ordinarily bring about a lower loan cost, as there are less gatherings included.