1. Grants: A variety of
private foundations and
governmental agencies
offer these grants and loans, but finding one that you qualify for may be difficult. In
fact, unless your
product or
service relates to
development of a new
technology or you are starting a
non-profit organization, there is little to no
value in looking for a
grant from the
federal government. State
governments, on the other hand, do offer grant
money to individuals. 2. Small
Business Loans:
Small business loans, on the other hand, are more readily available and may be a good
option for you. These generally
take the
form of loans made by private institutions that are then guaranteed by the
U.
S.
Small Business Administration (
SBA), a federal
agency that was established in the 1950s to assist small businesses. 3. Social
Lending: Another less traditional
financing avenue is peer to peer lending. We did not pursue this
route, but it does offer a
reasonable fixed interest rate for up to three years. One p2p lending option is LendingClub. To qualify, you must have a
credit score of at least 660. The
interest rate is based on several factors, including your
credit score,
loan amount, and amount of
outstanding debt. One of the best benefits of peer to peer lending is that the
interest rate is
fixed (which provides security against interest rate increases) and
amortized over three years (which forces you to
discipline your spending). 4.
Home Equity Line of Credit: If you
need to
obtain traditional financing and
own your home, the best option is likely a
home equity line. These loans usually offer relatively
low interest rates and tax deductions. Despite the recent credit
crisis we obtained, through our
credit union, a $50,000 home equity
line of credit with an
APR below
prime. If you do not own a home, discuss your options with at least three financial institutions. If you are a member of a credit union, or know of one that you could join, this could be your best option since credit unions are non-profit organizations. 5. Credit Cards: The many rewards offered by credit cards make them a
viable option for
funding a new small business. We used a
business credit card to
fund various start up costs, but we made sure to pick the
right kind of card. We
chose a card that offered an initial
cash back and future cash rebates when we make business purchases from
office supply stores and other retailers. Another option is to pick a card with a 0% APR introductory offer on purchases. There are many credit cards that have no interest for 12 months that are
worth considering.
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