What are my funding options if I cannot secure a bank loan?
Your first challenge as a new business owner is often determining how to finance your venture. Nearly every business will require some sort of capital to start off strong. To launch your startup, you may need to hire new employees, rent a space, invest in new equipment, market your business, and the like. With interest rates rising and banks more closely scrutinizing loan applicants, many new business owners are turning to alternative funding options. Our Austin, Texas business startup attorneys explore your options when it comes to funding your new venture below.
Small Business Loans
Perhaps the first avenue that comes to mind for raising funds for your business is a small business loan. Banks offer small business loans, but it can be hard to qualify. Most banks will require a stellar credit score, strong business model, and at times previous business success. Many new business owners will find themselves denied by large banks. Alternatively, there are several lending companies that may have looser criteria for a loan. It is vital that you research these lending companies, as some will charge exorbitant interest and could use predatory methods. Your business startup attorney can help by reviewing any potential lending agreement to uncover predatory lending schemes.
Borrowing Funds From Friends and Family
One of the most common methods for many small business owners to raise funds involves the help of friends and family. While banks and lending companies can be hard to convince as to the worthiness of your new business, your family and friends will likely be supportive. However, approaching family and friends can be intimidating and potentially lead to hurt feelings. To maximize your potential success, be sure to create a strong business plan that you can show to your potential investors. Decide in advance how much capital you need to raise and what repayment options you will offer the investor.
Crowdfunding has become exceedingly popular in recent years. Several websites like Kickstarter offer a means of presenting your concept to the masses in an effort to find investors. You will need to ensure your idea stands out in the crowd, as crowdfunding has become saturated by startups. Alternatively, you could consider using social media to reach out to friends and family. In this twist on crowdfunding, you use the internet to secure backers, but only among your social media followers. Whatever method you select, be sure to consult with a business law attorney to ensure your financing is legally sound.