Whether you’re starting a business from the ground up, purchasing an already existing business, or expanding a business you’ve been running for some time, you need capital. One of the major reasons most small businesses fail is due to a lack of capital. A lack of capital is due to poor planning and poor planning is often due to a lack of skill.
For those of you who have ever spoken to a personal banker about funding for your newly formed business, you know how difficult it can be to acquire. Major financial institutions are very cautious now days and require you to jump through many qualification hoops in order to get the resources you need to grow and survive.
For some business owners, they are denied and have to look elsewhere for their capital needs. This happened to me and I’m guessing that it has happened to many of you reading this article. So what’s next? Do you give up, struggle and hope you make it? Or do you find an alternative solution. My hope is that you will be persistent and look for alternatives. To help point you in the right direction, I’m going to share several resources that I've personally used over the years:
- Small regional banks and credit unions: these financial entities operate under a different set of rules. They are not bound by the strict ‘black and white’ requirements that are required of the bigger, more well known banks..
- The bank of you – if you have a cash value life insurance policy, you may consider borrowing money from yourself. You heard me right! Cash accumulated in certain types of life insurance policies is available to be lent back to the policy holder. For example, a person who owns an indexed universal life insurance policy may have accumulated substantial cash over the years. They can request a loan against that cash value from the life insurance company and then pay themselves back as their company makes money. The loan on these monies is typically not subject to taxation but it is recommended that you talk with your financial professional before proceeding.
- Crowdfunding – this is a relatively new concept to the business world and thanks to the SEC’s consideration with easing the investment requirements, this method should prove beneficial to many small business enterprises. Crowdfunding is best described as a group of private investors (people like you and me) who pool their monies for the benefit of the business owner. The monies will typically be offered in the form of a loan with a higher interest rate.
Small business administration – SBA.GOV can be an excellent resource for capital and education. These loans are given to small business enterprises at interest rates that are better than crowdfunding but not as low as borrowing from a bank. Nonetheless, this may be a suitable avenue for securing the capital you need to push your business forward.
I’ve listed just a few ideas but would like to hear from my loyal followers about other sources or ideas you know about.