3 Sources for New Business Funding

Locating new business funding can be a challenge sometimes. However, if you are starting a new business, locating the funding you need should be at the top of your priority list. Even if the economy is slow, there are still many places to look for small business funding. Here are a few of the more common sources for new business funding.

1. SBA Lender

The Small Business Administration was designed to help small businesses in America get their start. They run their program through local lenders. Therefore, you will be able to find an SBA lender in your area. To obtain an SBA loan, just go into your local SBA lender and apply. They will review your creditworthiness and your business proposal. The bank will decide to lend to you by themselves or bring in the SBA to help back the loan. This means that the bank and the SBA are now sharing the burden of the loan. If you default on the loan, the SBA will pay the lender for their half of the loan. This makes the banks more likely to deal with you if you are on the border of being creditworthy. SBA loans provide low interest rates and flexible terms for new business owners.

2. Commercial Lenders

The commercial lending market is still out there making loans to new businesses without the help of the government as well. Sometimes, you will be able to beat the loans that the SBA can offer out in the open market. With a commercial lender, you can find an array of programs that will help you get started. They might be able to offer you flexible loans such as a balloon loan. This type of loan can help you keep your cash flow under control early on as you only pay the interest on the loan. Then, as you grow, you can pay off the loan or refinance.

3. Private Lenders

In the commercial lending market, there are a bevy of private lenders out there. If you have a great idea for a new business that is destined to succeed, there are plenty of private investors that are willing to give you the money you need. They may provide it through loans or by purchasing equity in your company. If you have a really fantastic idea, you will likely find a lot of investors that would prefer to own part of the company. If you know your idea will be successful, you may have to decide whether you should just borrow the money you need or sell part of the equity in the company.

Private lenders may not want anything to do with the actual business that you are building. Some private lenders just want a higher than average return on their money and want to offer you a loan. If this is the case, you will borrow the money from them with a set repayment schedule just like you would with a bank.