I have a real passion for technology, and I have a prototype for a software-as-a-service business that has a lot of interest in the enterprise space. My biggest issue is that I don’t have the time or resources to push my idea forward with work and my other commitments.
I was wondering if the experts had any information on the best way to secure financing for my business?
A startling 30% of businesses fail because they run out of capital. Finding funding is much easier when you have a prototype and interest in your business already. The good news is that there are a lot of options for startup business financing.
Big banks approve just under 27% of small business loans, but small banks will approve over 50% of small business loans. Alternative lenders approve more than 40% of loan applications. Our experts recommend seeking out financing from smaller banks, credit unions and these alternative lenders first before going to a big lender and being denied.
You're doubling your chances of receiving financing by ignoring the larger banks first.
Microbusinesses can be started with as little as $3,000 or less, and since you have your prototype up and running, you may want to keep the initial financing low. This means that you’ll want to keep developing your product, but maybe you use the financing for marketing and gaining more clients.
Lack of capital is one of the main factors in businesses failing. If you need to secure financing and a traditional loan doesn’t suffice, there are a lot of funding sources available. SBA startup loans are a good place to start because they offer long-term repayment and low interest rates.
You'll need to have 2 – 5 years of financial projections, personal financial statement, profit and loss statements and will need to be in business for at least six months before applying. The biggest barrier that you’ll face is that the owner will have to contribute 20% to 30% to the loan.
Business credit cards are an option, and this is the leading form of business funding. You will want to have a business credit card as a part of your funding, and they can range from $5,000 to $150,000 limits. If you have good business credit, you may be able to have your limit increased.
Pay attention to any rewards programs being offered, and you may be able to save on traveling to pitch your idea to a potential client or stays at certain hotels.
These are going to be your main financing options, and if they don’t help, you can ask friends and family, pitch ideas to angel investors, use a 401k rollover, or raise funds using crowdfunding.
Utilizing a variety of funding methods is best, even if this includes multiple loans or business credit cards. Repaying your debt is also important, so make sure to take money out of your revenue each month to satisfy debt repayment and continue to build up your business’ credit history over time. This will allow you to continue to obtain funding through all stages of your business.