
So you’ve decided to start a business. Whether you’re buying a franchise or doing your own thing, the next question you’re going to tackle in this process is how to fund it. Is it best to use your own money? Should you use a bank or private money lender? Should you sell equity in your company to raise capital?
Well, the good news is, in these wonderful economic times within our great country, business funding is just about everywhere you look. There are pros and cons to each method of funding, of course, and we’ll take a brief look at them here. If you have more questions or want to discuss how to locate funds for your business, simply click the Learn More button at the bottom of the page. We’ll be happy to put you in touch with one of our networks of licensed lenders and match you up with the one that most closely fits your needs. Your “local bank” that you “have a relationship with” is probably not going to be a good fit for all of your business needs after all. Better to cut the legwork upfront and present a loan request to a bank or banks that are most likely to fund your project.
Bank financing is the first type of financing that we’ll discuss here, as it’s the most commonly sought after type of financing when entrepreneurs are thinking of starting a business. Banks are like people that they have very individual tastes, likes and dislikes. While one bank will throw your business proposition in the trash, another will happily shell over the money to fund your project. Matching your specific project up with a bank that has that specific taste in business opportunities will greatly increase your chances of getting funding, while at the same time, decreasing your legwork to find it. While banks have lower interest rates than many other sources of funding, the process to get the funding can be a little lengthier.
Private money from friends and family is another favorite source of business funding among many entrepreneurs. If you have a good network around you, you may seek this type of funding first to see if you have anyone in your close network of friends or family who would be interested in lending you the money as a loan or in exchange for some equity in the company you are building. Be careful to review with your attorney the SEC laws regarding securities, however, before trying to raise money in this way. There are many legalities surrounding private funding in businesses. Better to be safe from the start by taking sound legal advice on this one. In addition, many states also have their own rules on personal and business loans from friends and family, which an attorney will help you navigate expertly. The other benefits with privately funding in this manner include the terms. They are whatever you’re able to negotiate.
HELOCs or Home Equity Lines of Credit are also a fantastic way to fund a business if you’ve built some equity in your home. The pros are the low interest rates currently available and the amount of underwriting on this loan is quite substantially less, as they won’t be taking a deep dive into your business or business plans. They’ll be underwriting the loan solely on your home’s value and your personal credit in most cases.
IRA/401K money is another favorite. The downside to this is the potential for penalties and tax implications which you would need to discuss with a tax expert as well as a IRA/401K specialist. If you don’t have either of these in your business contacts tab on your phone, we’ve got both only a phone call away. Sometimes, even after those penalties and tax implications though, the profit far outweighs the initial hit. For this reason, many people have used and
continue to use this as a source of business funding.
For more information or to discuss business funding options for your startup or operating business, click the Learn More button at the bottom of this page! We have a network of banks and retirement account experts in place specifically to help guide you down this path. Don’t be shy to use the resources that we’ve compiled to benefit you and your budding or growing business needs!
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