Finance August 12, 2013 Last updated September 18th, 2018 1,460 Reads share

Business Funding Options For Small Scale Start Up Business

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If you are one among the aspiring entrepreneurs wanting to start their own business, the first thing that you need to secure is how to fund your business. Every start up business always needs financing and you can either shoulder it using your own fund if you have sufficient savings or to look for a business loan to get you started.

It is good to know that there are many business financing options that are available for you to get your financial resources in order to start up a small business. Getting the right one is the key in order to make your business loan work best in your favor. Here are business funding options that you may consider in order to help you start a small business.

Debt financing for your business

Many business owners are able to obtain sufficient business funding from different financial institutions like the bank to keep their business operating. Banks can provide you a debt financing option where you will be given a line of credit or to loan a certain amount with a repayment schedule and an interest rate. It is essential to prepare a business plan which will be a requirement for most banks when you apply for a business loan.

In addition to the business plan, a bank will also scrutinize your personal credit report, business credit report, income tax return, financial documents and other legal documents that it may require. Banks will often require for collateral for your property and it can foreclose it once you fail to pay your financial obligation diligently.

Business Grant for small start up technology business

State grants are available for small business owners that are engaged in the technology market. One of the most common grants of this kind is the Small Business Administration Small Business Innovation Research that will help small business owners fund their technology related business in order to fuel them up in delivering innovative technology to the consumers. Getting the help from a state grant is a good business funding source but how you use this fund is strictly limited with defined terms and conditions.

Supplier credit to meet your business needs quickly

A supplier credit is another financing option for your small scale business. It is a preferred choice by small business owners as the process allows them to meet their business needs more quickly. It is easy to obtain a supplier credit where the supplier of your products will allow you to pay for the goods which they deliver will be payable within a certain a period of time like weeks or months. If you are a good debtor, supplier creditors will be happy to approve you for a larger credit line or extend your repayment terms to help you position your business more effectively while getting the needed products to increase your sales.

SBA loans for all types of business

A small business administration loan is another funding option that you can consider. It however does not provide the loan directly to a business owner but merely provides a guarantee that you will be paying your business loan to a creditor. An SBA loan can be a good backup source to help you obtain the loan that you need to fund your business regardless of the size of your business.

Secured working capital loan

You can use your business assets as collateral in order to apply for a secured working capital loan. You will be able to obtain a lower interest rate with a more flexible repayment term for this kind of business financing option. You will be able to obtain cash in exchange of your asset with the ability to redeem your assets upon full payment of your business loan. However, there is a danger of losing all your business assets once your creditor will seize them in case you default in paying your financial obligations to them.

Venture capitalists for business funding

If your small business is ready to expand and grow its market exponentially, you will need an additional capital to help you address more funding requirements. Venture capitalist is a good option when your business is beyond the start up phase and has made quite a substantial positioning in the business. These lenders however are always too keen about gaining back their capital within a short period of time and your business must be a fast growing company to keep up with the time sensitive funding that you can obtain from serious venture capitalists.

Unsecured working capital loans

This is another funding option to consider which is favorable to a small start up business with no assets or property to give as collateral to secure a loan. The borrower however should have a high credit rating to qualify for the loan. The downside is you will certainly get a higher interest rate to pay for your loan with similar debt financing requirements as banks like you a business plan, credit rating report, bank statements, business financial history and other related legal documents to comply with before you can obtain an unsecured working capital loan for your business.

Short term and long term business loans

Getting a short term loan is a financial option that you can consider in order to meet your current business financial needs. For this kind of loan you will need an asset to secure your debt with a shorter repayment term. A long term business loan will be a better option when you need a larger fund especially when you need to expand your small business, improve its facilities and purchase major equipment.

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kellywilson

kellywilson

Kelly Wilson is a finance writer and advisor. She contributes towards Swiftmoney website. She likes writing about personal finance, taxes, debts, accountancy and other things.

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