How to Find the Right Funding For a Small Business in 2021

How To Fund A Small Business

Table of Contents

Bootstrap Your Business

Many people invest on their own whenever they start a business because it is complicated to receive funding otherwise. If you have a business that does not require a lot of capital to start, you can take out a 0% low interest APR business credit card that could allow you to borrow a small amount of cash for a limited time without incurring interest. The problem is, not everyone qualifies for a good interest rate, or worse, you can’t get approved for a credit card at all.

Investing in your own money into the business also establishes good rapport because it shows investors that you are confident in your business idea. Investors will be more willing to invest in your business idea if they see that you are willing to take the financial risk.

Apply For a Loan

Venture Capital Funding

Looking to fund your small business may lead you into the world of venture capital funding. This is a new form of investment funding usually offered in exchange for some ownership in the share or business. While most venture capitalists are usually seen as vultures, things aren’t that bad. For starters, most venture capitalists work alongside you with the business to make sure that their targets are met, and this can be a good thing in the sense that you get a pair of experienced hands around to help you make critical business decisions.

Most venture capitalists focus on companies with high growth. They also work on investing capital in return for equity, and they take have a much higher risk appetite, so they take higher risks in return for potentially higher returns. It’s usually pretty hard to find the right group of investors who would be interested in your business, so be prepared for a time consuming process while on this particular path.

Peer to Peer Marketplace Lending

Peer-to-peer lending is also another viable option to raise capital funding. This option was initially viewed as a way through which people could be accommodated because the conventional banking systems would not approve most of the loan requests coming in. Peer-to-Peer lending has, however, expanded and broadened its horizon. They even target customers aiming to pay off their credit card debts, home improvement loans, and even auto financing.

Merchant Cash Advance For Small Business Funding

A merchant cash advance is similar to a paycheck cash advance, and it offers business owners a cash advance against future sales. This option is available to businesses that can show that they have a steady cash flow.

The process of receiving a merchant cash advance is a simple one. Especially here at MJ Capital! If you qualify for the advance, you typically receive the bulk payment within a few business days. You can make the payments back as soon as you make sales. Any MCA will ask for important documents like your credit card statements and your bank statements to apply for this type of program.

The duration of a MCA is typically very short-term, with the maximum average range of most MCAs going up to 18 months. MCA’s are great for those who are struggling with the barriers created by most intuitions, and have proven to be a great way of creating opportunity for those who have had issues acquiring funding in the past.

Angel Investor Funding

Angel investors are individuals that invest in new or small business ventures in the hopes of gaining a high rate of interest out of them. These investors typically have much spare cash on them and are looking for a higher rate of return than what they would get from more traditional investments.

The best way to explain angel investment is to consider it as a case when another individual makes an equity investment into your business. Equity financing is typically used by non-established businesses that do not have collateral or a sufficient cash flow that they could use to secure a loan from a financial institution. Financing is much less risky with angel investors than business failure; the financed capital does not need to be paid back.

Most angel investors view business from a long-term perspective, but the primary disadvantage of using an angel investor is the loss of complete control as a part-owner. Most angel investments commonly come from family and friends, wealthy individuals, and also through angel groups.

Business Incubators

Angel Investors

If your business is in its infantile stages, you can also consider incubator and accelerator programs as funding options. Incubators are slightly different from an accelerator program because an incubator is more of a nurturer. What does a business incubator do? An incubator provides the business with a shelter and the skills and tools through which the business learns professional and strategic networking.

An accelerator program is different because it pushes a business to make a run or take a giant leap ahead. These programs run anywhere from four months to 2-3 years, and through this program, you can make good connections with mentors and professionals.

Apply For Loan

Even with all the technological and financing advancements, sometimes the most suitable mechanism for your business can be a conventional loan. Many government-supported small business loans are available with subsidies that could offer you a better APR rate than the new forms of financing.

Apply For a Loan

You will need to have proper financial statements and a good individual and company credit score for a conventional loan. These measures will help you in qualifying for a good APR rate. If you have good invoices, you could also cash in on your invoices to get that money faster.

Regardless of the financial situation of your business, if you are looking for funding, you should always keep all your options open and evaluate all the different modes available for you. Small businesses already have a limited number of options available for them, so the choice between all of them does not get too complex.

In the end, it does not matter which method you choose as long as your needs are met and as long as you can get reasonable terms for your loan.

Searching how to find the right funding for your small business? One of the biggest problems business owners face is the lack of funds to support and run their operations. Things become even more difficult and complex if you are thinking about financing a startup, especially for those with poor credit. Most traditional lending methods also don’t make many allowances for small business owners meaning that most of the funds are often given to big firms and organizations. Despite all that, there are still some ways through which you can receive funding. Here at MJ Capital Funding we pride ourselves in helping small and medium sized business owners obtain the capital they need to their their business operations to the next level.