Small businesses often require funding to grow. Fortunately, there are many sources of funding available. Before you apply for any type of business funding, make sure that you have a solid business plan and know how to pay back the money. Aside from a good business plan, investors also want to know the people behind the company. Here are some resources to find the best business funding available to your small business. Read on to find out how to get started.
While most lenders require certain documents, most require a current bank statement, tax returns, and financial statements. Having these documents ready can save a lot of time. You also want to avoid acquiring any new credit cards or making recent inquiries on your credit reports. If you’re unsure about your credit history, it is best to avoid major purchases, such as a new vehicle. If you have poor credit, you may not qualify for funding.
The amount of money you’ll need depends on your industry. When you apply for traditional business funding, lenders may analyze your personal credit history. Because your personal credit profile carries more weight in the overall decision, you should expect to have a high credit score. While a score of 680 or higher is the minimum requirement for traditional lenders, an online lender may accept scores as low as 500. Be aware that lenders will typically charge higher fees if you don’t meet their requirements.
A line of credit is a great way to find business funding without going broke. While a business line of credit requires payments to be made after the money has been spent, a business line of credit can help a company get by until its next payment. The good news about lines of credit is that they are flexible enough to allow a business to use the money whenever they need it. In addition to these two forms of business funding, businesses can use a business line of credit for basic day-to-day operations and for short-term working capital.
SBA loans often have lower rates, but they can take weeks or months to get approved. You should have a good personal credit history and business credit history. Funding circles are online lenders that offer a faster process than the SBA. They also have no prepayment penalties. Finally, you can apply for a grant. Small business grants are free money, and you can apply for them from nonprofit organizations and state and local governments. If you have a good business plan, you may qualify for a small business grant.
The second option is to sell equity in your company to investors. Equity finance comes from individual business angels, venture capital funds, crowdfunding platforms, and private equity houses. Angel investors come in earlier than other equity investors and invest a small portion of the company. They usually use UK tax incentives to encourage investment. Venture capitalists also come in at the early stages of a business, but this will likely be the second most significant round of funding. So, if you’re interested in applying for a small business loan, make sure to do your research and come prepared.