Always put your own financial affairs in order by establishing good credit. Starting a small business without good credit can be difficult, if not impossible. The hope for the future of businesses is those small non-traditional businesses that are run primarily on personal contributions or crowd funding instead of bank financing. Here are some ways that you can help you fund your small business
1. Loans
A loan is a debt instrument offered by lenders that allows the borrower to borrow money without requiring collateral. The main difference of a loan compared to a bond is that you do not give up any ownership interest in the business. Besides, you will borrow funds with some fee and interest.
The most common type of personal loans are secured loans, which usually require personal guarantees from the borrower as security for the loan and any repayment of the principal amount of your personal loan(s).
2. Credit Cards
Credit cards are loan credit, which is an unsecured debt for the lender because you don’t need to provide any collateral against it. The most common type of loans are secured loans, which usually require personal guarantees from the borrower as security for the loan and any repayment of the principal amount of your personal loan(s). For this reason, credit card is considered to be a high risk for lenders. Therefore, the interest rates and fees on credit cards are higher than other types of loans.
3. Crowdfunding
Crowdfunding is a popular and efficient way to raise money for small businesses. Since, it is an easy and cost effective way to market your company, many business owners are using crowdfunding platforms to help them finance their businesses. There are two types of crowdfunding, donation-based and reward-based. In donation-based crowdfunding, you reward your contributors with rewards for their financial contributions for your project. And in reward-based crowdfunding, contributors can either get rewards or a share in the profits if your business makes a profit.
4. Friends and family
Personal loans from friends or family can be a good option. But you must understand that contributions from friends or family tend to carry higher interest rates than commercial bank loans. Before you decide to borrow money from your acquaintances, check with the Internal Revenue Service (IRS) first to make sure that your actions are not subject to tax regulations. The IRS sets very strict rules for personal loans, so don’t assume that some loan between friends is tax-free.
