Alternative Financing Options For Startups - 2656 Words

Running a startup can be a thrilling experience, but finding capital can be a challenge. Many startup businesses reach out to friends, family, angel investors and crowdfunding to start their business. While these techniques can work, it is also possible to get loans for startups. This option can help the business to build credit and obtain immediate funding when it needs it. Whether you are looking for loans for startups or are considering alternative financing options, these techniques can help. Funding Your Company With Credit Cards The average annual interest rate for a credit card is 16 percent, so using a credit card to borrow money can be costly. Despite the costs, research by the National Small Business Association showed that 37†¦show more content†¦Using your personal credit cards for business can hurt your credit score and leave you unprotected if the business fails. Even when you are able to use credit cards correctly, the credit card companies can randomly lower your credit limit. If this happen, it removes potential funds from your business and can hurt your credit score. If you have decided to use a credit card to fund your startup business, begin to work on getting a better credit score. Most card companies require you to have a score of 660 or higher to qualify. At the very least, a higher score will enable you to get a lower interest rate. Since you do not want to use your personal income for the business, apply for business credit cards. Over time, the business will begin to develop its own credit rating that is entirely separate from your score. You should also start to expand the amount of credit available to you. Use a portion of the credit cards for the business so that the credit card companies do not remove some or all of your available credit. Ask Friends and Family Members for a Loan The cost of a family loan depends entirely on your friends and family. While some family members will refuse to accept interest payments, loans generally have a 0.38 to 1.85 percent interest rate. You can take their money as a loan or sell them a share of the business. Normally, it is better to take the money as a loan since most people are not sophisticated investors. When someone is given