Small Beginnings: 5 Financing Options To Use When Starting A Business

Building a business from the ground up is pricey. The equipment alone can cost you up to $125,000 and that doesn't include the price cost of office space or for your website.

Most startups that fail before they even get off the ground just don't realize how much it'll cost. 

You're too busy making important decisions to research the best financing option for your business. That's why we're counting down our list of the top 5 places to find capital for startups.

Ready to start saving time and making money? Check out this countdown of the 5 best financing options for startups and small businesses. 

financing options.jpeg

5. SBA Loans

SBA loans are those backed by the Small Business Administration and funded by banks. The SBA guarantees repayment of a portion of the fund, which makes you less of a risk for banks. Most startups can qualify for $50,000, but some have been known to receive up to $5 million.

However, you must already have a minimum qualifying business credit score. This can be a no-go for startups that have yet to accumulate good business debt.

4. A Commercial Bank Loan

The most traditional method on this list, bank loans are for businesses that need $250,000 or more. Just like your car loan, school loans, or mortgage, a bank lends you a certain amount upfront. You then pay the loan back plus the interest rate over a specified period of time.

You can qualify for a bank loan with a personal credit score. That means businesses that have yet to build up credit can still qualify. But be aware that your credit score must be high.

For a traditional bank loan, interest rates are 3%-6% for small businesses.

3. A Business Credit Card

Your business can qualify for $250-$25,000 with a credit card. This is perfect for startups that need a quick turn around time and want the option of tax-deductible interest. You can also earn cash back rewards that can be reinvested.

Just like any credit card, your credit score is a main determining factor in whether or not you qualify. And if you just barely pass the credit check, you may only qualify for the bare minimum.

Business credit cards have the highest interest rates on this list at 13%-25%. But keep in mind that if you want to borrow from a bank or the SBA in the future, you're more likely to qualify with a business credit score.  

2. Crowdfunding

If you haven't heard of crowdfunding, that's no surprise since this is a burgeoning method for funding startups and other business ventures. Crowdfunding allows you to raise money from the general public. That means this method has no limit to how much capital you can raise.

This is also an excellent option for business owners with poor or no credit. 

The best part? Crowdfunding has zero fees or interest rates so you don't have to pay back the money you're given.

1. The Best of the Best Financing Options for Startups and Small Businesses: Alternative Lenders

All of these financing options are great. But what if you don't qualify for loans or a business credit card? And how about if you can't wait to accumulate money from your crowdfunding venture?

Alternative lending is your solution.

Non-bank lenders like CapFront strive to help small business owners hit the ground running. If you need capital for your startup, learn more about our Term Loans or apply to speak with one of our relationship managers today.