You’ve got an awesome idea, a slick name in mind and the garage space
to start your dream business -- but not the cash. I'm not surprised.
Financing a small business -- especially a startup -- is an uphill
battle in a crowded field. In the U.S. alone, there are an estimated
27.5 million small businesses. And nearly 80 percent of them get their
money through bank loans, credit cards and lines of credit.
It’s no secret that it is harder getting money through those avenues
in the current financial climate. But just because it’s a bit of a
fight, doesn’t mean your great idea isn’t worth fighting for. Here are
some of the ways you can finance your startup, from standing in bank lines to going online:
Bank loans
Once thought of as a go-to option, national banks are still pinching pennies -- even after the Great Recession ceased.
The U.S. Small Business Administration released a report in July noting that lending to small businesses
declined last year. Business loans of less than $100,000 dipped to
$138.2 billion, from $139.5 billion in 2011. Even though conditions have
improved in recent years compared with 2008 and 2009 (the height of the
recession), business owners still find themselves facing roadblocks
from banks that continue to restrict their lending.
Community banks and credit unions may serve as your next best bet.
Since many community banks avoided the housing crisis, they’ll often
have money to lend without the same standards as national banks. Local
small businesses are finding success with community banks if they can
convince lenders they’ll make a profit and pay back the loans.
You might also tap a credit union for available funding. As nonprofit
organizations, credit unions may offer better lending terms for
borrowers than commercial banks.
Credit cards
Having plastic has its benefits. The perks include immediate access to
needed items, cash advances when you’re low on money and a way to track
spending. When financing your business with credit cards, a major
consideration should be whether you can pay off the balance monthly.
Credit card companies know commercial loans are hard to come by and
often jack up their rates -- sometimes upwards of 30 percent.
Government assistance
The SBA offers qualified financial assistance programs. While it doesn’t
loan money directly, the SBA does set guidelines for loans made by
third-party lenders (essentially a commercial loan with negotiated
strings attached). Businesses that go this route must first prove they
could not obtain financing at commercial banks with reasonable terms.
On the upside: SBA loans are usually structured with longer terms and
lower down payments, and may come with lower interest rates. On the
downside: SBA-backed loans tend to have a lot of stipulations -- often
requiring lots of paperwork and time, as approval can take longer than
loans from private lenders.
Whether you've been in business one week or five years, an infusion of
funds is always welcome. But what type of financing is best for your
business? There are so many factors to consider--from the stage of your
business to how much it'll cost to get the money--that just choosing a
path to follow can be overwhelming. 
