How To Fund Your Online Business
If you are starting an online business, congratulations! Putting together any type of business can be a fun and exciting endeavor. Before you can go too far with your business planning, however, you need to find a way to secure funding. For ideas on how to fund your online business, check out these seven common approaches.
1. Personal Loans
What stage are you in with business plans? If you are just starting out, funding options may be more limited, but that does not mean it is impossible to borrow capital. Typically, personal loans work best for entrepreneurs who have new businesses without significant sales history. With low-interest rates and wide availability, these loans offer flexibility that can make starting out much easier.
2. U.S. Small Business Administration Loans
Another top option to consider for an online business loan is the U.S. Small Business Administration. Depending on what type of business you have, the SBA offers several programs. From the 504 program for commercial real estate to the more general 7(a) program, there are numerous resources available. In most cases, SBA loans are best for those who already have profitable and established businesses, but that does not mean that new entrepreneurs cannot apply.
3. Bank Loans
On the other hand, maybe you are more comfortable working with your local bank or credit union. If so, you may also have funding options there. With low-interest rates and long-payment terms, bank loans are similar to personal loans and are available from traditional banks and credit unions. This funding method can be appealing to individuals who have already established a personal financial history with a particular funding institution.
4. Equipment Financing / Leasing
Although the amount of equipment that you need for an online business is usually different from that of a brick-and-mortar establishment, that does not mean you are not eligible for equipment financing and leasing options. For example, traditional businesses might use this method to purchase things such as vehicles and forklifts, but online businesses might opt for computer and POS system financing. Vehicles may also make sense for online ventures if you intend to add a delivery option.
5. Cash Advance
Unlike traditional loans, a cash advance offers funding against future sales. For example, if you need quick capital and you have the opportunity to grow your online business but you lack the financial establishment and history for traditional funding options, a cash advance can be a great option because it allows you to secure funds based on your personal credit and potential sales. In general, cash advances have straightforward applications and higher approval rates that appeal to new entrepreneurs.
6. Lines of Credit
Another flexible funding option to consider is a line of credit. As a kind of loan from a bank or another funding institution, lines of credit allow you to use your funds at any time after approval. Like a checking or savings account, your line of credit is something you spend and refill at any time as long as you do not go over your limit and you consistently make payments on time. This route can be a good choice for businesses that need a safety net without any obligation to use the money at a particular time for a particular reason.
7. Friends and Family
If someone close to you has asked you what you want for an upcoming holiday or birthday, another idea is to think outside the box with your answer. Instead of telling your parents that you want a new computer or a gift card to your favorite clothing store or restaurant, let them know that you are putting together an online business and see if they are willing and/or able to pitch in with some expenses. This may not be an option for everyone, but it is always worth considering if you want to try alternative funding methods that do not involve running a credit check.
8. Community Donations
Depending on the type of online business you are starting, another option might be to ask for community donations. For example, if you are putting together an online startup that works closely with your town or city, and you plan to prioritize giving back in some way that benefits your community, this may be a solid option.
Finding ways to fund your online business is essential if you want it to be successful. Follow these tips to help you get started.