No matter how great your business idea is, one essential element of business success is your ability to obtain sufficient funding to start and grow the business. While many people finance their new companies with their own money or by borrowing from family or friends, there are other options available. Also, founders must understand that raising funding is never easy, and takes time and effort.
Many business failures have resulted from lack of funding and running out of cash while growing the business.
That’s why, at almost every stage of the business, entrepreneurs find themselves asking – How do I finance my venture?
While bootstrapping and getting incubators, angel investors and venture capitalists are all great options, diversifying your sources of financing allows your business to better weather potential downturns. But it will also improve your chances of getting the appropriate financing to meet your specific needs.
Small Business Loans
Small business loans are available from a large number of traditional and alternative lenders. These types of loans can help your business grow, help you expand into new territories, enhance sales and marketing efforts, allow you to hire new people, and much more.
There are multiple types of small business loans available. The options vary depending on your business needs, the length of the loan, and the specific terms of the loan. It’s a good idea to shop around and find the bank that meets your specific needs.
Business Lines of Credit
If you’re looking for a more flexible source of money for your new business, consider a business line of credit. Often described as a hybrid between a credit card and a traditional business loan, a line of credit is a pool of money established by the lender with a maximum credit limit. You can draw from the line of credit for nearly any business purpose and in any amount, up to the credit limit.
The biggest advantage to a business line of credit is that you only pay interest on the amount you’ve used at any given time. So, your credit limit may be $30,000, but if you only withdraw $10,000, then you only pay interest on that $10,000 that you’re actually using.
Beyond this flexibility, here are a few other key advantages of the business line of credit as a source of startup funding:
- You can withdraw money anytime and for any business purpose
- It’s more accessible to those with less-than-perfect credit
- Can be an excellent way to begin building business credit history as a startup
- Provides flexibility for fluctuations in business cash flow
For these reasons, the business line of credit is a source of finance worth exploring.
Keep in mind that if you apply for a business line of credit, most traditional business lenders will require applicants to have at least six months of business history. Offering startup money to brand new businesses is a risk that many banks don’t want to take.
If you need startup funding to purchase equipment, then consider equipment financing a top option for funding your venture. Equipment financing for startup businesses is particularly apt for your situation because of its self-secured nature. Because the equipment you purchase will act as collateral for the very funding you use to purchase it. Equipment loans will be easier to qualify for, even if you don’t have much time in business.
Another funding option that you’ll be able to access with little-to-no time in business is invoice financing. Through invoice financing, you’ll be able to access an advance for a portion of your business’s outstanding invoice value.
Government grants and subsidies
Government agencies provide financing such as grants and subsidies that may be available to your business. The Canada Business Network website provides a comprehensive listing of various government programs at the federal and provincial level.
Getting grants can be tough. There may be strong competition and the criteria for awards are often stringent. Generally, most grants require you to match the funds you are being given and this amount varies greatly, depending on the granter.
The Bottom Line
Although the options to seek funding are diverse, there are certain criteria that you need to satisfy and certain documents that you need to provide to be considered and qualify for the funds. This will all depend on the lender and the funding option you choose.
Crunch TimeZ is equipped with the knowledge and expertise to support your business throughout your search and funding applications. Our proven approach makes this process seamless and efficient.