The 5 Most Popular Types of Business Funding

It cannot be argued that one of the best ways to earn money is through your own business. But, we all know that in order for you to run your own small business or company, you need to have the necessary funds.

So, how do you get money to fund your business? Well, there are actually a lot of options out there, but today, I am going to talk about the 5 most popular ones: Bootstrapping, Equipment Financing, Angel Investors/Venture Capital, Personal Loans, and Business Line of Credit.

  1. Bootstrapping

Have you ever heard of the term bootstrapping? It can mean a lot of things based on the context, but in a business sense, bootstrapping is essentially where you use your own resources to fund your business venture.

You can either opt to use your own money (may it be from savings or other resources) or you can ask your direct family or friends to help you get a financial backing.

Or perhaps, you can use your own funds and then just pay for any remaining balance using the money that your venture will earn once you’ve successfully opened it.

2. Equipment Financing

The next popular type of funding is Equipment Financing. The gist of this is that you tie in a piece of equipment as your collateral and you will then get some money that you need in order to have your venture up and running or you can even use the cash to buy equipment as well.

For example if you need some ultrasound supplies for your medical center, you can apply to get funding for this purchase, the interest rate and the amount of money provided will depend on products type you are willing to buy and your credit history.

This is a popular funding method because applications are more than likely to be approved since if you default on your loan, your equipment can be taken away by the lender.

The money that you will receive will depend on the equipment you use to tie in as your collateral. The repayment terms are flexible and it is very lenient as well.

3. Angel Investors/Venture Capitalists

If you’re having a hard time securing a bank loan, then you can find some angel investors and venture capitalists instead. Basically, they both offer the same thing. They fund startups that have a high potential for growth and in turn, a high potential for success. They know that startups can be high risk, but most of the time, they invest in businesses that are most likely going to be successful in a few years that know how to use the right marketing tools and people, developers and leaders.

The downside to this is that angel investors/ venture capitalists will own a portion of your business and they are automatically going to be a part of the board.They will have somewhat of a control of your business and they are ultimately going to have a say when it comes to your business decisions.

Typically, these investors will fund a business about 5 years up to 8 years since most financial experts agree that this is a suitable time frame where a startup matures into a successful venture. Still, these investors can help you get the funding that you need if you’re having a hard time getting cash from other means.

4. Personal Loans

If you’re confident that you just need a bit of a financial push, you can just get funding from personal loans.

This type of loan is an unsecured loan which gives you confidence since you do not need to tie anything as collateral.

The money that you can get from personal loans can be used not only for your business, but also for other things as well such as equipment acquisition, hiring employees, etc.

If you already have enough funding and you do not need much, you can opt for a cash advance instead.

5. Business Line of Credit

If you do not need a lump sum of money and you just want some as your business progresses, then the business line of credit is one of the best options for you.Essentially, a business line of credit is where you agree with a financial institution that you will set a maximum loan limit and you can then withdraw funds as you see fit.

You are only required to pay the amount that you’ve withdrawn (along with a small fee) which makes this an enticing option for business owners.The only thing you need to be aware of are the requirements. Some institutions will require you to already have a business up and running, have earned a set amount of cash, your business has been operating for quite some time, just to name a few.

Conclusion

There are a lot of viable options if you need some funding to have your business up and running. You can resort to getting personal loans if you have a considerably high credit score. Or you might want to do some bootstrapping and fund it yourself using the resources that you have. A business line of credit is also ideal for people who already have a venture and they only need a financial push from time to time. All in all, you shouldn’t worry about where to get funding as you pretty much have a lot of great alternatives.

 

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