You’ve made the decision to start your own business. You’ve built a solid team, written a strong business plan, and now you’re ready to fund your business. It’s important to remember that there is no one-size-fits-all financial solution. How you finance your business will depend on your industry, your personal financial situation, and your business goals. Here are tips to help you choose the funding option that’s right for you.
Working with a bank
Going through a bank gives you the ability to access large amounts of funding at once. However, obtaining a traditional business loan can be challenging. Business owners must have substantial collateral to back up a loan, which can be tough when you’re just starting out as an entrepreneur. At Sandy Spring Bank, we often recommend Small Business Administration (SBA) loans to fund a new for-profit small business. Here are some things you’ll need to qualify for an SBA loan:
While SBA loans offer great flexibility, especially for new business owners, there might be instances where a conventional loan is better for you. If you have substantial collateral or have been in business for years but are looking to expand, you may benefit more from a traditional bank loan. It’s important to have an open conversation with your bank and explore your options before making a final decision.
Other funding options
For some entrepreneurs, other funding sources might fit their needs best. No matter how great your business plan or pitch, if you don’t have money to put into your own business or have poor credit, you’ll need to look at other options. You may also need money quickly and don’t have time to undergo a loan application process.
Family and friends can be a great source of funds when starting a business. Talk to those closest to you and see if they’d be willing to help support your new business. Of course, obtaining money from family and friends isn’t an option for everyone. Alternative lending, which is any lending outside of a traditional financial institution, such as a bank or credit union, may be your best option. This can include direct online lenders, private lenders, marketplace lenders, and crowdsourcing options (such as Kickstarter and GoFundMe). Alternative lenders can often give your small business the financial boost it needs to get started.
Do your research
Just like your attorney and CPA, a bank or lender is part of your permanent business team. It’s critical to do your research ahead of time to determine what financing method is right for you. When looking at banks, interview a few before deciding. Check out different online industry forums and see what (and who) people recommend. Attend industry networking events and seek guidance from others who have been there.
At Sandy Spring Bank, we want to be sure you’re making the decision that’s right for you. Choosing a bank is about more than business, it’s about developing a solid relationship with a trusted advisor who will help you meet your goals, now and into the future. To talk to Sandy Spring Bank about our business lending and SBA options, please contact Jessica Butler, Business Banking Sales Manager, by phone at 410.266.3000 x6932 or email at jbutler@sandyspringbank.com.
Starting a Small Business- Part 1: Tips for Writing a Business Plan That Works
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This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.