Financing Your Small Business

Congratulations on starting your small business. There are countless things think about and a big one is financing your small business. Whether you’re looking at going into business for yourself on the side, or you plan to quit your 9 to 5 and make this a full-time career, you’re not alone. There are more than 28 million small business in the United States, making up 99.7 percent of all U.S. business, according to the Small Business Administration. Before you can take your business from concept to reality you need to address how to finance your small business. Here are five tips on financing your small business.

  1. Raise Your Credit Score

    Because you’re just getting started, you might have to borrow money against your personal finances. Small business lenders will look at your personal finances to determine credit-worthiness if they are lending to a new business. To qualify for startup financing, you’ll want to make sure your personal credit score is in good shape. Check your credit reports for mistakes that could be weighing down your score and dispute them with the credit bureaus, maintain a low balance on your credit cards and stay on top of your bills. 

  2. Small Business Loans

    The U.S. Small Business Administration (SBA) works with lenders to provide loans to small businesses. Instead of lending money directly to small business owners, the SBA sets guidelines for loans made by its partnering lenders. Loans guaranteed by the SBA range from small to large and often have restrictions on how the funds can be used. However, it’s not always easy to obtain one of these loans. The SBA will take a closer look at your business before providing you with a loan.

  3. Attract an Angel Investor

    Angel investors invest in early stage or start-up companies in exchange for equity ownership interest. Angel investors are typically individuals who have spare cash available and are looking for a higher rate of return than would be given by more traditional investments. However, if you choose an angel investor, you’ll have to share control of the company with your investor. 

  4. Get a Micro-loan

    A micro-loan is often between $500 and $35,000. These loans are often so small that commercial banks don’t issue them. Instead, you’ll need to find a micro-lender. These lenders offer smaller loan sizes and often require less documentation thank banks with more flexible underwriting criteria. Micro-lenders likely charge higher interest rates for loans than traditional banks. 

  5. Try Crowdfunding

    You’ve maybe heard of crowdfunding sites before. These sites can help small businesses raise money for a relatively low cost. Keep in mind, crowdfunding sites aren’t built for long-term funding. Rather, they’re designed to facilitate the asking for and giving of a support for a single, one-off idea or project. Often, project-creators offer incentives for those who pledge.

Insurance that works for you

No matter the size of your company, business insurance from Farm Bureau can help shelter your small business from the uncertainties of life. Your local Farm Bureau agent will spend time getting to know you and your business operation to help customize your coverage.