More than 30 million small businesses are operating in the U.S. right now. About 400,000 open for business every year.
Starting a business isn’t cheap. In fact, it costs about $30,000 to get started. Whether you’re just getting started or you’re looking for funding to stay in business, small business banking can be challenging.
We’ve put together a list of seven tips to help you secure funding for your company.
1. Bank Loans
Banks are often the first place business owners look for loans. These loans are stable, and the interest rates are competitive. But they’re not for everyone.
Banks are reluctant to loan large sums of money to people who don’t have a track record of success. Bank loans are also hard to get if your credit isn’t the best.
Your credit score typically needs to be above 700 and closer to 720 to qualify for a traditional bank loan.
2. Personal Savings
More than half of small business owners use their personal savings to start their company and keep it going for the first year. This isn’t a bad option, as long as your savings account has enough in it.
Remember to account for more than just the cost to start and maintain your business. You should also have enough to cover emergencies like damage to your building, customers who don’t pay and vendors who don’t deliver.
3. State and Federal Grants
The Department of Commerce offers grants to small businesses for both startup costs and expenses during the early stages. It maintains a comprehensive list on its website.
It also runs Minority Business Development Agency (MBDA) centers to assist minority-owned companies. You can search the database to find an MBDA center near you.
4. Venture Capital
You’ve probably heard of venture capitalists on programs like “Shark Tank”. VCs are investors who give small business owners money in exchange for a share of the business.
If you’re willing to hand over part of your company, VCs can also provide you with advice and guidance based on their own business experience.
5. Angel Investors
Angel investors are similar to VCs in that they give business owners money and receive a share of the company in return. But angel investors tend to be individuals rather than VC companies.
They also don’t require the same level of capital in return for their investment. Angel investors are much more likely to work with a company that is doing something they value both personally and professionally.
6. Reach Out to Your Network for Small Business Banking Assistance
You’ve probably made valuable contacts as you’ve started your business. Now is the time to connect with them to discuss a loan or other kind of small business assistance.
Don’t underestimate the power of a trade reference. If your contact isn’t able to loan you money, they might be willing to provide you with a written reference that you can include with your loan application.
7. Crowdfunding Your Business
Some small business owners have had luck with crowdfunding. This allows you to ask a lot of people for smaller amounts of money.
Crowdfunding tends to work best for startups and for existing companies looking to fund a new product. As with any request for funding, you’ll need to demonstrate the viability of your product.
Consider Speciality Funding
You might also consider applying for a loan to fund one area of your business. For example, instead of applying for a general-purpose loan, you can apply for equipment financing to purchase tools.
Click here to connect with us to discuss your small business banking needs and apply for financing.