The COVID-19 pandemic had some lasting impact on the economic landscape. However, not everything is bad. While the outbreak had initially sent countless businesses of all shapes and sizes to temporary (or permanent) closure, the pandemic has opened new business opportunities. We saw changing needs of consumers amid pandemics.
And any savvy business person would jump right away to cater to these new needs. As the vaccination rollouts continue, we see a promising return of the business landscape to normal operation. New small- and medium-sized businesses are opening up.
Along with paperwork and licensing concerns, one of the primary concerns of an aspiring business owner is where to get initial funding for the business. Not everyone is lucky enough to have the fortune to finance their dream business.
With that in mind, listed below are the topmost viable financing options to help you jumpstart your small business plans.
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If you are confident that you can raise capital all by yourself, then consider self-funding. Raising money through self-funding comes in different forms. For instance, you may dip a bit into your savings account, your retirement fund, even sell your car or mortgage your house.
One upside of self-funding is that you do not feel obliged to anyone but yourself. This means that you have complete control of your business. However, it is a gamble as you take risks all by yourself.
2. Attract Angel Investors
Reaching out to angel investors is another small business financing option. But what are angel investors anyway? Also known as seen investors or private investors, angel investors are individuals with high net worth who are willing to provide financial backing for small startups they deem to have potential investment value. Accordingly, the median amount angel investors put in a business is around $600,000.
However, take note that if you opt for angel investing, it means giving a portion of control of your business to the angel investor. Typically, this means giving up around 10 to 50% of business ownership.
In this digital age, raising business funding has become a lot easier. Aside from tapping into online lenders, angel investors, and the likes, you can ask people to help you pool money through crowdfunding.
GoFundMe is one of the top crowdfunding platforms for individuals wanting to raise funds with the help of others. With a good and attractive campaign, you can increase your media exposure and reach, enticing more and more individuals to help you finance your business dream.
4. Small Business Administration Loans
Loans for small businesses are a good option for entrepreneurs who lack enough capital but want to retain total control of their business. Most SBA loans stipulate generous payment term length, reasonable interest rates. This can finance 80 to 90% of the business startup costs. Also, as compared with traditional bank loans, SBA loans ask for a lower down payment requirement.
Nonetheless, getting approved for an SBA loan has a catch: you need to set up collateral as a security for your loan. This could mean putting your house or other property as security.
5. Business Credit Card
In this age of digital technology, online lending options are increasingly becoming a popular alternative to conventional business loans. This option is seen to be very much convenient amid the COVID-19 pandemic with all the social distancing restrictions.
Application for online lending is quick and easy as it only takes about an hour to complete. If your loan application is approved, you will immediately receive the decision and funds within days.
6. Equity Financing
Equity financing is another option for entrepreneurs who want to raise capital to start their business and who are okay with giving up a portion of business control. Equity financing is an arrangement wherein an individual or organization provides operating capital for an entrepreneur and, in exchange, is a share of business ownership. This type of financing option is ideal, especially if you do not have a good credit history.
To sum up, the main advantages of equity financing are — one, no need for loan repayment, and two, no need to be creditworthy. The only downside is giving up a portion of control over your business and profit-sharing — sounds similar to angel investor financing.
Choosing the best available financing option for your small business startup is not for the fainthearted. After all, being an entrepreneur means facing risks head-on with confidence that you will survive any challenges ahead. As the world is slowly healing from recent economic and health crises, it is time to make that business dream a reality.