If you’re like most founders, raising money is the most stressful part of getting your business off the ground.
You’ve probably already heard that 90% of startups fail. And one of the key reasons this happens is due to issues with financing and money. It’s critically important that you can access the money you need to get your business off the ground and stay afloat during that first year.
If you haven’t yet looked into start up loans, we have everything you need to know about getting funding for your business.
Why Is Funding So Important?
Every start up has financial business goals which need to be achieved. To achieve these goals, it’s essential that you seek funding early on in the process. That way, you can plan your financial tasks and set key milestones for growth.
These days, it can be tempting to bootstrap your business. While this is entirely possible, building a company without any outside money can limit how quickly you grow.
Gaining funding can also be a big step for business owners who have been hesitant to launch. Once you begin looking into start up loans, your financial future is dependent on making your business work.
What Are Start Up Loans
According to Richard Branson, even Virgin almost failed due to cash flow issues. This was why he had to sell Virgin Records- so the cash could be used to ensure the success of Virgin Atlantic.
Start up loans give you some breathing room, allowing you to market your business, gain customers, and grow your product range.
When you choose to take out a start up loan, you work with a traditional lender which offsets some of the financial burdens of launching a business. That means you can make necessary purchases for your startup that you wouldn’t otherwise be able to afford.
Here are a few options:
A Line of Credit
A line of credit is like having a credit card for your business. Often, it will be interest-free for the first year, which can make it much easier for you to cover your expenses.
After this period, the interest rates are often similar to credit cards. You’ll also only pay interest on the credit you use, instead of the entire line of credit.
One of the biggest reasons why this is a good option? You can pull out cash. Start ups often struggle to get their cash flow sorted, and this can be the difference between success and failure.
This allows you to take a loan for the equipment you’re purchasing. You then use that equipment as collateral for the loan. This often means that the interest rate will be lower than other options since it’s less risky for the lender.
This is a massive benefit for start ups, since you can pay off the cost of your equipment as your business begins to make money.
You can receive up to $50,000 from a number of microloan providers. This is through the U.S. Small Business Administration, and you can use it to start your business.
Of course, the limit may not be enough to get your startup off the ground but it’s a good option if your business is predominantly online.
As you can see, getting a loan for your start up can be hugely beneficial. You’ll be able to pay for any necessary equipment, have more cash on hand for unexpected expenses, and grow more quickly.