A Road Map for Success
There’s no hard and fast rule for how much time you should devote to planning your business venture. But there will come a point when you can no longer avoid the obvious question: “How am I going to pay for all of this?” Your answer may be found in the following options:
Use your own money.
Before you consider borrowing money to launch your business, take a hard look at your personal financial assets. Can you withdraw funds from your savings account? Cash out your stocks? Downsize your standard of living? Sell that boat or luxury car? If these are not viable options, consider your credit cards. Many a small business has stayed afloat by charging its way through a first year or two of operation, but it can be risky. If you follow this route, be sure to only use cards with favorable interest rates (cash-back bonuses are helpful too!), always read the fine print up front and make every payment on time.
Apply for a commercial loan.
Commercial loans, whether from private or public sources, are generally approved on the basis of a business owner’s capacity to repay as indicated by past business experience, personal credit rating and collateral. For a first-time business owner with little or no credit history, this can be a tough — though not impossible — category to crack, and a well-crafted business plan could make all the difference. By presenting a strong case for potential profitability, your written plan might just change a skeptical loan officer’s mind. Loans to support small businesses are typically available from:
- Commercial Banks which used to be less than enthusiastic about financing business startups due to the high rate of new business failure, and today are more welcoming. In fact, many of the biggest names in banking have entire divisions devoted to small business lending, and most offer convenient online banking options. Types of funding and terms vary from bank to bank. Browse internet sites for broad details, then make an appointment to meet with a loan officer at a nearby local branch to discuss specifics.
- Credit Unions offer many of the same services as banks, including small business loans and online banking options, but as nonprofit institutions, they tend to put greater emphasis on personal service and feature higher interest rates on deposits and lower rates on loans.
- Commercial Finance Companies are often willing to take higher risks than banks, but they commonly charge higher interest rates. As a general rule, these firms tend to evaluate loan applications more on strength of collateral than a company’s track record or profit potential.
- Digital Banking Platforms typically provide many of the same services as traditional commercial banks and credit unions, but with one important difference: All transactions are digital; no brick-and-mortar visits are required. Freelancers working from home or in shared workspaces may find this platform’s emphasis on convenience and flexibility appealing.