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Taking loans from banks or credit unions is common among young entrepreneurs. Traditional lending gives you a sense of security. With a fair credit score, you can access larger amounts and lower interest rates. Borrowers that already belong to a bank or a credit union are at an advantage.
Short-term cash advances or small amount installment loans are an alternative to traditional lenders. Credit scores matter less in this context. Online lenders base their decision on your debt-to-income ratio. The maximum amount you could get with an installment loan will vary depending on the lender, most often up to $5,000. Other effective ways to get equipment financing or cover additional business costs include crowdfunding and grants.
When you raise funds from a large pool of people, you do crowdfunding. It's like taking small monetary gifts from people who want to help you and don't expect anything in return. If your small business is in a creative field or produces tangible products, crowd funders may be an excellent alternative to a business loan. Your risks are lower long-term, but you need to get acquainted with the crowdfunding platform rules.
If you are patient, you can apply for various grants. Unlike traditional banks, credit unions, and alternative lenders, grants take longer to get. The process is more complex and it requires a lot of involvement on your side. They are generally accessible through NGOs and governmental programs. In most cases, these institutions focus on specific groups, such as women or veterans.
Finding the right financing option for your small business is a matter of research and matching the means available with your needs. Read more on how we impact businesses and check back for more useful content.