You have a great business concept, a beautifully mapped business plan, an intricate list of your possible expenditures, and a good product line up. Now, the only thing missing are the funds to make your start up business dreams into a real, live, and tangible set up that will attract your target audience and bring you profits.
However, not everyone is lucky enough to have the cash on hand to fund their business concepts. The next best thing is to get a commercial bank loan. Unfortunately, banks don’t readily give money to anyone that applies for a business loan. You have to go under a strict evaluation process to help them determine if you are worth risk. Most of the time, many struggling start up owners don’t make the cut. Here are some ways you can fund your business plans even if you have already been refused a business loan:
If you are new and small business start up, head to the SBA or small business administration and seek for financial assistance. They may not be able to give the money directly to you, but they will help you by guaranteeing your loans, giving the lenders confidence that their money will be covered should you default on the payment. In essence, the SBA acts like a co-signer to help you secure funds. There will be a lot of paperwork involved to prove your worth, but it will be well worth your effort to check SBA’s 7(a) loan program.
Getting a microloan, also known as microfinancing, means getting a few small loans from a personal lender or smaller lending firms who are more considerate of people with little credit score and no collateral. Keep in mind that going this route may not fund your whole capital costs, but even banks won’t be able to cover the whole amount. Only a certain portion of your start up costs will be covered so you have to get creative in looking for other funding sources. These small loans can help cover part of the operations costs or working capital on things like equipment, inventory stock list, furniture, and the like.
If you truly believe in your business concept, then start a crowdfunding account. You’ve seen this usually when people ask money from strangers for sick loved ones. But crowdfunding is not limited to sob stories, as they can be used for whatever means and message you want to promote. This involves raising funds from large numbers of people, in various social platforms. Funds are more or less considered as donations, but your convincing powers in motivating the crowd to give to you has to be truly deep to make an impact. Finding what you call backers for your business may be difficult, but still if you’re desperately seeking funds, then it is worth a try.
Tapping an angel investor is another great way to increase your cash flow. Angel investors don’t mean you literally pray to angel and ask for miracles. An angel investor is essentially someone who is already established in the field. This person is typically much older and has achieved great heights. This angel investor is at the stage where in he or she wants to give back to the community by providing financial assistance and guidance to struggling entrepreneurs. Remember, not all entrepreneurs think of just the profit. Many successful ones out there are excited to mentor newbies because they, too, have struggled in the beginning. Paying forward the kindness they have received is never a bad thing. There are many angel investor networks available online, so enlisting in one of them to get leads is a good idea. All you will need are the materials and right convincing powers to motivate your angel to help you.
Trade Credit or Vendor Financing
Acquiring financing from vendors is one terrific method of reducing your costs, especially if you have not been approved for a business loan. If you buy products, raw materials, equipment, or even services from a vendor, ask if they can give you easy terms of payment. Longer terms means you can stretch out your budget and pay these vendors a fixed smaller fee every month.
If you are not starting a business from scratch, but buying an existing business, you can try to see if you will be able to get the seller to guarantee part of the loan. This is also called getting an earn-out provision for all or part of the business, which you pay the seller back from the profits you gain while running the business.
Credit Card Financing
If you’re business loan has been refused, you might consider credit card financing for funding. Remember to read the fine print and check the interest rates. Some credit cards have high interest rates so be wary of those because they can sink you very easily into debt. However, if you are able to avail of a zero percent APR with longer terms, then go for it. The key here is making sure the credit card you use doesn’t have high interest rates.
Friends and Family
As a last resort, ask friend and family for help. It may sound a bit embarrassing to call on these special group of people to address your business concerns, but as the saying goes, blood is thicker than water. Who else will you turn to in moments of need but them? A direct loan is one way to go about it. Another one is to offer an equity interest or stock ownership in your business, with the option of buying back when you’re business is up and running. They can also help you come up with the collateral or serve as a co-signatory for you bank loan.
There are many other options if your bank rejects your loan application. However, if all the other methods fail, it is time to take a step back and determine if you do have the financial capacity to truly start a business. Sometimes, it helps to start small and continue to save by cutting out non essential expenses. The crucial thing to do is to keep on persevering and working hard to get that business up and running.