How to Fund a Small Business
According to Forbes, there are about 33.2 million small businesses up and running in the U.S. right now, and they all got their start somehow. Raising enough funds is an important factor to get your small business up and running and to ensure longevity and future success.
How much does it cost to start a business? The exact amount will depend on a variety of factors like the type of business, the tools and supplies required, office space, number of employees, cost of utilities, and much more. It could cost as little as $3,000 for a small, at-home freelance business, or more than $100,000 for a bigger operation. The Small Business Administration has a startup costs calculator to help estimate personal startup costs.
Finding the right funding for a small business can seem overwhelming. Here are some of the most common ways to get funds for your small business:
- Savings: Most start up founders use some of their personal savings to fund a portion of their business. Entrepreneurs should save and set aside one year of living expenses because it generally takes a few months for a startup to become profitable.
- Credit Cards: The decision to use a credit card to fund part of your business should not be made lightly. Credit cards often have significantly higher interest rates that can greatly increase your monthly balance. With this option, you could end up with a debt balance that is higher than you planned for, which could negatively impact your new business. This should not be used as a main source for funds.
- Bank Loans: The Small Business Administration works with banks to help guaranty loans for entrepreneurs to increase access to capital. You work directly with your preferred lender who will help guide you through the process. To increase your chances of getting a loan, make sure you have a personal financial statement/balance sheet, historical personal tax returns, a business plan, an expense sheet, and financial projections for the next two to five years. Preparing these documents will give you an idea of how much funding you’ll need and will help the bank determine your best loan options.
- Government programs: The government offers grants to some individuals starting a new small business. The SBA has Small Business Development Centers all over that can coach you on available grants and provide business consulting and training.
With all these different options, getting funding for your small business may seem overwhelming. First State Bank Nebraska partners with the Small Business Administration to support entrepreneurs because we know that you play a vital role in the local economy. Our experienced team of lenders will work with you to identify your specific needs, and together we’ll develop a tailored solution that fits your financial goals. If you’re ready to take the next step for your small business, visit us online at 1fsb.bank/business/loans/sba-loans to learn more about an SBA loan from First State.
Five Common Ways To Fund A Small Business Beyond Personal Savings (forbes.com)
8 Ways to Get Money to Start a Small Business (freshbooks.com)
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