Small Business
October 17, 2019
Top Sources of Business Startup Financing
Are you looking for capital to start a new business? Then
you will be better prepared to get to your own pocket. About 60 percent of
entrepreneurs looking for financing to start a business use personal savings to
get started, the Small Business Administration (SBA) said. Here's more on how
startups get their value.
Personal Equity and Traditional debt Business startups are
the main source of financing: about six (57 percent) startup owners use their
personal savings for start-up capital. In addition, a quarter of a quarter
starts its business without start-up capital. This approach is most common for
beginners who do not have staff.
Here's how to break up other sources of money when starting
a business:
- Personal credit cards: 8 percent
- Bank loan: 3 percent
- Other personal property: 6 percent
- Home equity: 3 percent
- Business Credit Card: 2 percent
If you take into account personal credit cards, “other
personal assets” and home equity, startup owner’s use their own money to start
a business, reaching 74%.
Starting with your own money is a little easier, but if you
are just starting out as a startup with a noise chain. According to the SBA,
nearly 2 percent of entrepreneurs who do not use start-up capital at all use
about 2 percent of companies that launch start-up capital worth less than
5,000. About 21 percent of startups cost between $ 10,000 and $ 24,999. More
than 14 percent have between $ 50,000 and $ 99,999 to start a business. Less
than 10 percent of startup capital is $ 250,000 or more; most likely, they will
be employing companies.
While most businesses of all types start without external
funding, women-owned enterprises are more likely to do this than men-owned
startups. More than twice as many men (0.6 percent versus 6.6 percent) than
women use bank loans to spend money on their startups.
African American and Latin American companies are much less
likely to use bank loans than Asian or Caucasian companies. Instead, these
entrepreneurs typically turn to personal credit cards for seed money.
The idea of starting a small business without bankruptcy
may seem like a reasonable step, especially if you are afraid of getting a
debt, but the SBA notes that this can pose a dilemma for women and minority
entrepreneurs. Without applying to banks for loans, these entrepreneurs cannot
establish strong banking relationships in the critical early years of their
business. If you need money for working capital or expansion, then it is worth
having a relationship with a banker.
According to SBA, about two-thirds of small business owners
have debts. Using debt is not a bad step to start or expand your business if
you do not do it wisely. What to do and what to keep in mind:
- Write a business plan. For a startup, a business plan will help you think through your strategy and determine how much money you need to borrow, and also help potential lenders be successful enough to pay off.
- Do not bite as much as you can chew. Startup owners are particularly optimistic about their chances of success. A more conservative view of your financial forecasts will not only affect the lender but also ensure that you do not go beyond a debt with more or less debt than it actually is.
- Keep some of your money. Ultimate lenders want to see that you are confident enough in your startup to invest your own money. You really cannot count on getting a loan if you are not ready to take the risk yourself.
- Do not rely solely on personal duty. When you use a personal credit card or home equity for seed money, you risk your credit rating (and possibly your home). Even if you have successfully repaid your personal debt, you will not create a good credit rating for this. Instead, try a business credit card and business financing - this will help your company rise and help it have a good reputation.
