3 Interesting Ways to Fund Your New Small Business

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You've taken almost all the necessary steps to put your small business on the road to success. You've completed your market research, developed a plan, decided on the structure, picked a business name, and know what permits and licenses you'll need. Now, it's time to get your financing in order. 

For starters, you'll need money for market research, supplies, inventory, equipment, consultation fees, incorporation fees and insurance. You should also have enough for rent, utilities, salaries, suppliers and other fixed and variable costs until your business can sustain its operational costs.

Raising funds for a small business can be tricky. However, you can improve your chances of raising funds successfully by being prepared. Have your tax returns, bank statements, financial statements, legal documents, credit report ready to expedite the process. 

#1 Traditional Banks 

The most common option for small business owners seeking funding is traditional banks. They can provide steady funding through lines of credit and term funding. A small business line of credit is good for dealing with unexpected costs and cushioning your cash flow. However, this funding can be limited, interest can pile up, and there may be annual fees. Meanwhile, small business term loans are larger than lines of credit and can be used for operational costs, expansion, and capital expenditures. 

Unfortunately, funding from a traditional bank can be challenging to acquire. Banks may ask for collateral, a good credit score, high sales volume, an impressive business history, and a large cash reserve. 

What's more, banks can take anywhere from two to six months to process an application, approve funding, and provide the funds. This can be especially frustrating if the bank rejects your application.

#2 Online Funder

Because it's increasingly difficult for a small business to secure funding from a traditional bank, many small business owners are turning to unconventional online funders for small business financial solutions that can quickly help their business. 

Such online funders may offer short-term funding, long-term funding, bridge funding, working capital funding, fixed funding, business expansion funding and other options. Instead of traditional metrics, a good online funder will evaluate your business's overall health. If your business's credit score is weak, then you may be able to leverage your personal credit score to get approved. 

The biggest advantage of working with such an online funder is that most applications are approved, while funding is provided quickly, sometimes in as little as 24 hours. However, it's important to use a reputable online funder with positive reviews that believes in transparency.

#3 Angel Investors

If your small business doesn't qualify for traditional funding, then you may consider an angel investor. These funders invest in small businesses and startups with interesting business ideas. They often approve funding based on a gut feeling. If you have the passion, commitment, business plan and technology to impress an angel investor during a pitch, then you could be approved. 

The biggest disadvantage of partnering with an angel investor is that you may lose control of your business. The funds are often given in exchange for an equity ownership. That's why many small businesses prefer funding from an online funder to retain more control of their operations. 

While getting funding for your small business can be challenging, you can get approved by being passionate, prepared, detail-oriented and thinking outside the box. Often, unconventional options can be more suitable than traditional ones.