Starting your own business can be a great idea. You can be your own boss, take advantage of a prospering market and make more money than you would by working for another company.
To successfully get your new business off the ground and build a strong foundation for it, financing is essential. Is this a catch-22? How can a startup business qualify for financing if it doesn’t have a credit rating yet?
One mistake some new entrepreneurs make is going to a bunch of different banks and applying for loans or microloans at all of them. This has two negative effects. First, it can give lenders the appearance that you’re desperate and unsure of how to run your business. Second, if you’re filling out applications that are making a pull on your credit, it can hurt your company’s credit rating.
Instead, sit down and evaluate your options. Look at the types of credit you may qualify for, and ask questions about them before applying. Know the requirements and terms. Know exactly how much funding you need and what you want to use it for. That way, when you go to apply, you have the appearance of a calm, collected and prepared entrepreneur.
Look Into Alternative Financing
Several alternative financing programs can help startup companies. For example, if you have a large social media following and you’re passionate about your business, you may be able to raise the equivalent of a microloan using crowdfunding.
Some micro-lenders provide funds with good terms in a more traditional sort of way. These microloans tend to have somewhat higher interest rates, but they’re generally accessible for small business owners. The idea is to put this capital to use for things that increase your profits and enable you to have a stable cash flow.
Check Out Equipment Financing
If your business generates profits using some type of equipment, then you have access to one of the best financial tools for new business owners: equipment financing. This type of funding combines the low interest rates of traditional loans with a package that is less risky for lenders. The equipment acts as collateral for the loan, so you can qualify for funds that you probably wouldn’t be able to afford normally.
The great part of this type of equipment financing program is that you’re building up your company’s value and generating profits with your equipment. Paying off the loan is easier this way, and you can improve your work quality at the same time.