Among the most frequently asked questions for those interested in starting a business is, ÂIs it hard to secure funding?Â
The answer will depend on a number of factors.
Credit ratings will effect people trying to get a loan. If bad credit is a factor, securing funds will be harder than for someone with a good credit history.
It is harder now than it was before 2008 to secure a loan. Lenders are more stringent with loans and securing credit is harder for those with less than stellar credit ratings.
Loans from family members have started many a successful business.
These loans can often be paid back at a slower rate than with non-family. Relatives aren’t always interested in charging late fees or interest to loans.
This isn’t true for every situation, but for the most part, family loans are the easiest to repay if a business is successful. Most loans of this nature are small, though there have been large loans from wealthy family members. The larger the loan, the more likely the relative is to treat it as a ‘real’ loan.
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Quite often the best way to secure funding for a new venture is to make the money yourself.
When you are working and saving money toward your own business you have no loan to repay. This route will typically take much longer than taking out a loan, but the reward is knowing you have no creditors.
Some people that take this route become consultants and work on their product on the side. They develop the product for the people they are offering consulting services and then change their business model at a later date to sell the product they’ve created.
Angel investors are individuals that offer funding to start ups.
These people are wealthy and invest in new businesses in order to help them grow. While this sounds appealing, most angel investors will expect a return on their investment. This means you must create a product or service that sells well or a company that is good enough to merit another larger company buying it.
Not every new business owner will want to sell what they think of as their ‘baby’, so keep in mind that angel investors look for start ups that will turn a profit through sale of it or many sales of service/product.
There are companies that work in essence like angel investors.
These companies are seed funders and also venture capitalists. The former offers small amounts to new companies, literally seeding it with capital. Seed companies offer advice to brand new businesses which is a boon to new owners.
Venture capitalists offer large amounts, hundreds of thousands, sometimes millions to new business, but these are better reserved for someone that has started a company in the past with good results.
There are many ways to fund a new business.
With careful consideration choosing the one that is right for your new business will become clear. Consider the stage of planning or start up you are in, how much funding you need, and how far you plan to go.
Photo credit: capitalcabin.com
About the Author: Tina Samuels writes on ways to accept credit cards online, social media, healthcare options, home improvements, and small business solutions.