5 Ideal Ways to Finance Your Small Business in 2018
BY: JOYDEEP BHATTACHARYA ON MONDAY, FEBRUARY 12, 2018
Stock markets performed well, fuel prices remained low, employment rates remained stable and small business lending slowly but surely made its way out of the black hole of the credit crunch.
2018, however, will bring in newer challenges. Don't worry though; small businesses have enough fire in their bellies and ideas in their heads to live with the uncertainty.
In this guide, we will cover some of the ways small businesses can finance their ventures in 2018.
1- Apply For Loan Using Online Lending Platforms
Traditional debt funding could become challenging for small businesses, particularly those looking to make an entry in unproven markets. This is where online lenders have been filling a tremendous market gap, and will continue to do so throughout 2018. Too many loan attempts can cause 'too many' queries to your credit report, which can bring down your credit score. Online loans solve this problem, among many others. Loan comparison is easier, as is negotiation for flexible terms. Not only does the loan application life-cycle get significantly reduced with online lending, but also businesses can shop around for flexible repayment terms.
Loan comparison is easier, as is negotiation for flexible terms. Not only does the loan application life-cycle get significantly reduced with online lending, but also businesses can shop around for flexible repayment terms.
2- Leverage the Option of P2P Lending
As Dooma Wendschuh, co-founder of Province Brands suggests, “much like crowdfunding websites, P2P lending platforms connect 'seekers' with 'givers'. Here, businessmen can float their requirements of loans for any kind of business activity”. Some of the key benefits offered are:
- The loan application evaluation process is super quick -with approval or denial coming in anything between 1 day and 2 weeks.
- The Annual Percentage Rates offered by these platforms make these loans more inexpensive than those from traditional banks.
- Even businessmen without a strong credit history, and without 2 years of financial records to show for them, can float their requirements for business loans via P2P lending platforms.
One caveat, however, is that there's hardly a structured option to get the loan in the name of your business. So, it will be a personal loan, and that will set your credit score back.
3- Use Government Backed Lending Agencies like SBA
In general, small business lending picked up in 2017, and this makes it worthwhile for businessmen to reach out to government-backed lending agencies, such as Small Business Administration (SBA) in the USA.
In FY17, for instance, the SBA's flagship 7(a) issued more than $25.44 billion in funding. SBA CDC/504 Lending is focused on powering economic development among minority-owned businesses and underserved communities.
SBA 7(a) loans help growing companies, and the loan amounts can go as high as $5 million. This makes it worthwhile for small businesses to keep on persuading with the loan applications in their nation's government-backed lending agencies in 2018.
4- Bootstrap Your Way to Success
For businesses with a robust revenue model, low dependency on 3rd party suppliers, and those in newer markets, bootstrapping often becomes the best way forward. When the average sales made during the initial phase can fund your working capital, why dilute your equity for the money you can do without?
Small business owners would do well to keep their skin in the game, assess their sales funnel and business model, and look to finance their ventures with cash from sales. Also, consider these tips:
- Opt for co-operative working spaces, to minimize expenses on workspace
- Hire freelancers and virtual assistants instead of full-time employees
- Match your vendor payments (out-flow) and customer payments (in-flow) to reduce situations of cash-crunch
- Look for co-purchasing groups in your market to get the best deals on essentials such as office supplies, housekeeping, etc.
5- Crowdfund Your Next Project
The success of crowdfunding model hardly needs any underscoring. However, it can be unnerving for new businesses to release a thorough business plan on a public website, with the hope of getting contributions from believers. Here, small business owners need to be smart about choosing the right crowdfunding platform for their niche. With so many niche crowdfunding websites coming up, this will be a key success-driver for small businesses.
2018 will certainly be a high-octane experience for innovative startups, as they collide head-on with their dreams and their fears. Of course, there will be the guaranteed uncertainty that every business brings to the table - raw material prices will shoot up, employees will ask for out of cycle raises, key customers will default on payments, your loan applications will be questioned and probably turned down. Financing, however, will be accessible; try these 5 methods.
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