Launching a startup can be both an exciting and a daunting task. A brilliant idea can turn into a flourishing business but laying the foundation demands a hefty amount of investment. Balancing a great idea and finances is crucial to ensuring that your business does not run itself into the ground. There are many different ways to fund your business but not every method is appropriate for every potential business.
Different loans will have varying degrees of usefulness to you depending on your unique financial situation. A home equity loan or line of credit may be best for you if you are a homeowner who already has 20-30% equity in the home at the minimum. If you are interested in this type of loan, you will also need a 650+ credit score. A home equity loan will enable you to borrow 80-90% of your home's equity with a 3-8% APR. This type of loan is especially beneficial because of its low interest rates. However, do not make this loan lightly as you run the risk of losing your home if you are unable to pay back the loan.
A personal loan is another option you may consider for bringing your startup to life. A 650+ credit score will enable you to borrow up to $40k with a 5-20% APR. If you qualify, you will likely receive funding in less than 1 week. Additionally, this loan is an appealing choice for many because you can receive funding pre-revenue. On the other hand, you must bear in mind that this loan is limited to $40k, making it preferable for those seeking a relatively lower investment to launch their business.
Networking has often been touted as an invaluable tool in the business arena and starting up a new business is no exception. If you have a willing family member, friend, or acquaintance that believe in you and your business's ability to succeed and has the funds then all you have left to do is put it in writing. Be sure to determine a workable interest rate as well as a cap on funding amounts in order to ensure that the loan is fair to both you and the person funding you. This type of loan has the potential to be tricky since it involves personal relationships and and failure to pay back the loan would result in emotional as well as financial repercussions.
Crowdfunding is another alternative to conventional loans to start up your business. There are a number of sites you can use to explain and promote your cause and such sites allow you to persuade a large number of people to invest a small amount of money each into your business. The crowdfunding model means that there are no minimum or maximum funding amounts, no interest rates, and no debt to pay off, making it an ideal option for would-be business owners. However, crowd-funding works on an all-or-nothing basis, meaning that you either reach your monetary goal or you do not. You may also need to deal with many legal regulations if you choose to utilize this means of funding.
Having a great idea but limited funds shouldn't stop you from bringing your ideas to life. Find the method of funding that works best for your situation and move one step closer to starting your business.