New startups are born each day. On an annual basis, approximately 50 million businesses are started, adding to an estimated of 500 million startups that exist worldwide. However, these kinds of studies are hard to be conducted because figures don’t exist for a lot of countries of the world.
Although some statistics may frighten entrepreneurs - more than 50% of small businesses fail in the first four years – in today’s world, there are more resources and information available than ever before. A study conducted in 2011, showed that only 3% of businesses started made it to the 5th year of operations.
But what exactly drags businesses down in this aggressive manner? How much does it all have to do with improper funding and the inability to properly apply the financial plan initially created?
Well, other statistics show that incompetence is the leading cause of business failure, situating itself at 46%. However, that doesn’t mean it is ok to neglect any detail when it comes to your business’s financial plan. It sure is the foundation of your future company.
According to the same study mentioned earlier, most startup funds – more precisely about 80% - come from the entrepreneurs’ own pocket or their family or friends.
In recent years, the statistics have gotten even worse than back in 2011. A lot of sources now say that a staggering number of 9 out of 10 businesses fail. Entrepreneurs should not feel discouraged, but should, however, be as prepared as possible.
So, for those entrepreneurs who are still optimistic enough to try to start a business, let’s see what the best business funding options are there.
1. Bank Loan
Although getting a bank loan has become much harder today, applying would still be a great idea. Some banks have even started to offer special loans for small businesses. Make sure you do plenty of research and find out which bank would be more appropriate for what you need.
Today crowdfunding has become a popular method to raise capital for your business. You can now access platforms like Kickstarter or IndieGoGo, create a campaign and wait for people to believe in your idea. If the crowd likes your idea they can start to donate small amounts of money.
Funds accumulated in your 401(k) might be a great choice when it comes to funding your business. Although considered to be legally complex, if the right steps are taken accessing these funds shouldn’t be a big deal.
4. Angel Investors
Angel Investors are wealthy individuals who are interested in investing in a great business idea. For a percentage of your business, you could get all the needed financing from an angel investor.
Getting a microloan might be an excellent idea especially if the sum of money that you need is not very high. You can get a microloan from a microlender – usually different non-profit organizations. There are a few hundreds of such institutions throughout the United States.
6. Family & Friends
Getting funds from your family or friends is probably the easiest way to raise money. A lot of entrepreneurs use this method instead of getting different loans. If however, you are not as lucky as those entrepreneurs luckily there still are a lot of options out there.
7. Credit Card
If you don’t have any other option, using a credit card to fund your business can work – if used responsibly. However, it can be quite risky to try something like that because of the risk of ruining your credit score by simply falling a little behind on your payment.
If by any chance you get bad credit, there are still some methods to get funds for your business. I have mentioned a few platforms that could be helpful in a situation like that. Check out the next section for more information.
Getting funding with bad credit
Established in 2007, OnDeck is focused on providing loans to small businesses. It has already loaned over 11 billion dollars to businesses while creating more than 74,000 jobs. From 2015, OnDeck has also started offering lines of credit and long-term loans. The platform has extended to Canada and Australia as well.
Fundbox offers loans to over 70,000 small businesses. It was founded in 2013 and is partnered up with QuickBooks, Freshbooks, Xero, Harvest, and Zoho.
"Small businesses are the core of our economy, yet the resources available to them are limited at best. We give small businesses new financial power and guidance so they succeed." Eyal Shinar, CEO
Another option for getting a loan for your business is applying on Kabbage. They don’t only look at your credit score, but also at your business performance. Entrepreneurs can get up to $250000.
BlueVine offers funds to businesses with at least 530 credit score. Through a quick online application, entrepreneurs can access a credit line that can go up to 5 million. Based in Redwood City, California BlueVine has behind it venture capital firms and wealthy private investors.
Credibly offers loans and capital solutions to small businesses. The loans are usually tailored to the specific needs of the business, in order for the entrepreneurs to get exactly the right amount of capital.
Small businesses can access up to$250,000.
6. Street Shares
A small business funding marketplace, Street Shares is based right outside of Washington D.C. It was launched by Mark L. Rockefeller, Mickey Konson, and Ben Shiflet in 2004 and its investors include ACCION International, Washington D.C. area community bankers, military veteran investors, Harvard Business School angel investors and Capital One alumni.
The platform provides small businesses based in the United States 3- to 36-month term business loans that can reach $100,000.
Upstart stands out among similar platforms by looking beyond your credit score and focusing on your education and experience instead when it comes to loaning a sum of money. Featuring a direct-to-consumer lending platform, Upstart maintains one of the industry’s highest consumer ratings according to different leading consumer review websites.
All in all, there are many options out there. Getting capital from your family and friends or obtaining a grant are obviously the best choices for any small business, but you shouldn’t be discouraged if you need an actual loan.