Ways to Fund a Business
If looking to fund a business, there are quite a few options available. No matter what the economy is like (good or bad), funding a business is constantly a concern for entrepreneurs. Some ways to fund a business are crowdfunding, bank loans, business plan competitions, business incubators, or investors.
- Crowdfunding needs a website and on it, you detail your idea for a business or project and request others to invest in it. Instead of paying back money, you pay them back with “perks” from your business.
- Banks are still lending money to small business, despite the rumors that have sparked. So why not take advantage of the money that banks are willing to lend. Contact your local banker and request assistance with developing a loan submission package that meets the lender’s specifications. Also, be ready to check with more than one bank.
- Enter into a business plan competition. Many competitions award cash and prizes for the teams that win which could be used to start your business.
- There are also business incubators that are available to those trying to start off. Business incubators are usually public-private partnerships that reward financial assistance to startups and businesses to help increase their local economy and further entrepreneurship.
- And there are always investors to try and turn to for money.
Finding money can be hard, but every business around you did it, and you can too
Brand Yourself and Your Business
Are you thinking about starting your own business? An important step to letting “the world” know you are in business and to convey who are you to prospective and existing customers is branding your business. Branding is the easiest way to inform consumers what your business is and what your business offers. Many people involved in start-ups or small business put branding in the backseat and focus solely on with funding and product and/or service development issues in their startup phase. This is a critical mistake. Branding, although intangible, is just as valuable other companies assets. A Business’ brand sets the stage for how customers should perceive your business and often reflects its reputation behind its name or logo. Properly branding your company or business will increase the public’s awareness of your name and logo, create a reputation that instills loyalty and trust in your customers, as well as provide familiarity to bring in prospective customers.
Should I Personally Guarantee a Business Loan?
Most people wouldn’t think twice about signing a personal guarantee for their business. However, most financial advisers and business attorneys advise to only do so as a last resort. The reason being, you stand to lose a lot more than your business and any assets it may hold. You, as the guarantor, could lose personal assets such as your home.
Perhaps the most important factor to keep in mind is that the guarantee will only apply to you, not to your partners or managers. It means that you are pledging to make good on the loan. In some instances, you may be responsible for the loan even if your business is protected by limited liability laws. Therefore, when you sign a personal guarantee, you are acting as a cosigner on the loan. As such, creditors are legally entitled to come after you in the event the debtor, your business, defaults or misses a payment.
A lender may also seek to have your spouse sign the guarantee. This would put all marital assets at risk of seizure/liquidation by the creditor. However, most states allow for protection against such actions through various innocent spouse provisions.
Guaranteeing a loan for your business demonstrates a strong level of personal commitment to your business, which can provide the incentive to convince a bank to loan you the money. In some instances, however, you may not have a choice. The Small Business Administration (SBA) requires that any loan they provide must be personally guaranteed by every person with a 20 percent or larger ownership interest in the business.
“Pay As You Earn” Loan Program
The “Pay As You Earn” Executive Order could benefit Small Business owners and entrepreneurs. On November 2, 2011, President Obama announced an executive order to accelerate the “Pay As You Earn” student loan program in 2012. The program was originally supposed to begin in 2014. Graduates face tremendous difficulty when it comes time to repay their student debt. Approximately nine percent of graduates were unable to repay their loans in 2009, up from seven percent in 2008. Because of this financial hardship on recent grads, the current state of the economy and a general reluctance to fund higher education, the “Pay As You Earn” student loan program was accelerated to begin in 2012. Under the program, banks are eliminated as the “middle man,” in student loan repayments, which will ultimately result in saving money.
Benefits of the Program:
- Monthly payments will be capped at 10% (present law caps payments at 15%)
- Loan forgiveness will be offered after 20 years (present law forgives outstanding loans after 25 years)
- Students will be allowed to consolidate federally backed loans in order to reduce interest rates.
Why is this important to small business owners and entrepreneurs? As graduates have faced increasing difficulty in securing employment in the current job market, many have turned to starting their own businesses. The ability to reduce student loan payments will directly impact these new business owners and entrepreneurs as they seek investment capital, acquire inventory and secure lines of credit for their new venture.