Top 4 Ways to Finance Your Small Business in 2023
It’s 2023: The Dow is in a bear market, a global recession is looming, a latte is 80 cents more expensive, and…you’re in the middle of trying to finance your new small business.
The timing may not be ideal, but don’t abandon ship just yet! There are still plenty of funding options for you that go beyond applying for Shark Tank each year (but if you’re interested, go for it). In fact, we won’t be diving into anything that requires you to give up even a smidge of ownership in your business.
In just a few minutes, you’ll have everything you need to start planning your own path to a fully-funded small business. Let’s hop to it!
2. Small Business Grants
The good thing about grants? They’re 100% free. The not-so-good thing? Everybody wants them. Grants tend to be highly competitive, but they’re your best bet for staying completely debt-free while growing your small business.
It takes time to tailor your applications to each grant submission, so be sure to find the grants that align with your mission and are a natural fit for your business. Grants.gov is an excellent online database to start your search for grants distributed by government agencies. Private corporations and nonprofits also offer grant contests. Here are a few of our favorites:
- FedEx Small Business Grant Contest: Awards $50,000 to three winners per year, and $20,000 to seven winners.
- Arch Grants Startup Competition: Willing to relocate to St. Louis for at least a year? You could win $75,000 of equity-free funding, $25,000 to relocate, with additional funding of up to $100,000.
- Nav’s Small Business Grant: A quarterly grant with a grand prize of $10,000.
Applying for these grants can feel daunting, but don’t talk yourself out of it! You wouldn’t sign up for college without at least shooting off a few scholarship applications, right? Take it one step at a time, and shoot your shot!
Crowdfunding is another “free money” tool, but it can take a long time to see tangible progress towards your funding goal. However, if you’ve developed a hot new product that people want to see on the market, there are ways to let them support you through popular platforms like Kickstarter or GoFundMe.
You might choose to offer early supporters certain perks, early access to a product, or an inside look into your creative process. If you have any sort of following on social media, this is an option worth exploring.
3. Bank Loans
To qualify for most bank loans, you’ll need a strong credit score and established business revenue. Your business must also be at least 2 years old. If you’re in the minority of small businesses that can meet these requirements, you’ll definitely want to start here. Bank loans tend to offer more competitive terms and lower interest rates than other types of loans.
If you happen to be at the helm of an early stage start-up company, should you skip ahead to online loans? Not a chance! Talking to someone at a traditional bank can be a great place to start finding what you do qualify for.
After exploring your options at a national bank, reach out to smaller banks in your community. They are more incentivized to support local businesses and may be willing to work with you.
If your lenders are unwilling to offer you a traditional bank loan, ask them about their application process for SBA loans. With this type of loan, the U.S. Small Business Association is federally guaranteeing the money that’s lent to you.
Because this makes your business less of a liability to lenders, it’s typically more accessible than that traditional loan. The application process for an SBA loan is extensive, though, so be prepared to pace yourself!
4. Online Loans
If you’re unable to secure a bank loan, online loans may be your best plan B…but be cautious. The rates on these can be astronomical, with some APRs reaching 100%. Take your time and shop around to find the loan that best fits your needs, and only take out what you need.
On the bright side, you can expect a smooth application process, low (if any) credit requirements, and fast cash. Just be sure to speak with a financial advisor before you sign on that dotted line!
Now that you’ve got an overview, you could navigate the land of small-business financing all by yourself. But why would you want to? Consider enlisting a solid financial expert to help you stay the course when it comes to your long-term financial wellbeing. Wherever you are in your small business journey, KYN Accounting is here to set you up for financial success. Contact us today!
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