You’ve done your homework, and you’re ready to launch your retail business. However, coming up with the capital you need to get off to a successful start is a whole other obstacle. Many an entrepreneur has been overwhelmed with the process of securing business financing. What options do you have at your disposal? Consider the following list of 8 ways you can finance your retail store:
- SBA Loans
Many entrepreneurs turn to SBA loans in their quest to launch their business startup. While there’s several different types of loans you can apply for, keep in mind that there will be numerous restrictions. You should also consider, if your business is considered high-risk, an SBA will be an unlikely option.These loans can be applied for at your local bank.
If your business needs less than $50,000 in capital, an SBA microloan might be a better option. Businesses that do not require a lot of startup cash (e.g. home-based business) often choose this method of business funding. According to the SBA, amicroloan averages $13,000.
- Personal Loan
Unfortunately, not every entrepreneur will be able to take advantage of a personal loan. Those with bad credit will likely have to look elsewhere. A personal loan requires that the applicant have a credit score of at least 650. If you do meet the criteria, a personal loan should provide you with around $20,000 to $50,000.
Crowdfunding is an increasingly popular option for securing working capital or startup cash. While attractive, it’s key that you request the right amount you will need. If your projections are too high, it could scare of any potential investors. Also, keep in mind that some crowdfunding sites will not allow you to receive the cash if you haven’t met your goal.
- Home Equity Loan
If you’re a home owner, you can use this to your advantage if the need arises. If you have at least 20 percent equity in your home (and good credit), you could borrow up to 80 percent of your home’s equity. Even though the interest rates are typically lower, this method does involve the risk of losing your home if you are unable to repay the loan.
- Retirement Account Rollover
Experts advice that you only consider this option if you have at least $50,000 saved in a retirement account (e.g. IRA). If you need to, you can borrow up to 100 percent of your savings. The reason some entrepreneurs choose this option is because it avoids debt and interest, and it does not affect your credit. However, if your business fails, you’ve lost all yoursavings for retirement.
- Family and Friends
On one hand, friends and family can be some of your biggest fans and more than willing to help you succeed. On the other, if things go wrong, borrowing from friends and family can put serious strain on your relationship(s). The best approach is to make sure they are fully aware of the situation (eliminate the potential for “surprises”), and create a legally binding contract.
- Cash Advance
A merchant cash advance involves the provider purchasing your business’ future credit card sales at a discount in exchange for a cash advance. With an alternative lender like First American Merchant, the amount purchased and at what discounted cost are agreed upon by both parties. The amount, along with the agreed upon fee, is then paid back as a percentage of the business’ daily sales. The benefits of a cash advance include: hassle-free application process, fast cash (received in as little as 24 hours), easy collection process, and minimal documentation requirements. Even businesses that have bad credit, insufficient credit history, bankruptcy, tax liens or have been placed on the TMF list can secure the high risk business loan they need with a high- risk provider like FAM.