After the Recession of 2008, getting loans to start a small business became increasingly difficult. While it may seem overwhelming for small businesses to get the finances they need, there are options out there. The following are the top ways to get small business funding.
Micro loans are small loans that may not even be big enough for a regular bank to make, but are enough to help a small business get started. Micro loans can come from either government programs or independent sources. According to the U.S. Small Business Administration, the average small business loan from a bank is about $135,000. If a business needs only $10,000 or less, micro lending may be a good option.
2. Community Banks
Community banks are usually small and locally owned. The people who run these types of banks are sometimes from the community and have an interest in supporting local people in their business ventures. Community banks sometimes look beyond just the financial aspect of determining who gets a loan. They may take into account experience and personal connections when funding a small business.
3. Small Business Administration Loans
These types of loans are from the government but are offered through various credit unions and banks. There are several types of funding available through the Small Business Administration. The 7(a) Loan Program and the Microloan Program are two examples. After the Small Business Jobs Act was passed in 2010, business owners were allowed to use what is called a 504 to refinance commercial debt with lower financing and interest.
With the Internet being used for nearly everything now, it’s not surprising that it has become a potential source of funding for business startups. Crowdfunding websites such as Kickstarter allow small businesses to get funding through online investors who may donate as little as $25 to a project they deem worthy of support.
5. Angel Investors
These are individuals who are willing to invest in promising startup businesses, but they’re normally not willing to just write a check and walk away. They want to see progress and make a profit in the long run. They may want to see a detailed business plan before investing. They may even want a say in some of the decision making in the business. These types of investors often invest through networks or groups.