You might have what you think is the best business idea the world has ever seen, but without funding that idea might not ever get off the ground. What a lot of new startups don’t realise is that starting a business can be more costly than you think. This obviously depends on the type of business, whether you need a storefront, how much stock (if any) you need to start trading, and many other aspects of the business.
What’s important is that you understand the routes you can possibly take to secure business funding if you need it. Our sections on BusinessEgghead.com that are dedicated to the topics below provide much more in-depth information, but let’s take a brief look at some areas of finance.
Finding business grants
Due to the shear number of businesses applying for small business grants, the demand and competition for this area of funding is really high. However this isn’t to say it’s impossible to obtain business grants, you just need to find grants that are applicable for your area of business, find grant providers, and put together a proposal that demonstrates the objectives of your business.
Many grants aren’t aimed at starting a small business in particular. Grant programs are usually obtainable through privately-owned and funded groups and state programs from several US State Departments. As an example, education and medicine are business areas that are typically awarded these types of grants. However, other businesses can obtain business grants too, although often with specific eligibility criteria.
Grants may come in a variety of different forms, such as for scientific or other research, as well as personal grants for individuals often given for financial aid for education in the arts. There are also agencies that award grants for other purposes like environmental causes that support biodiversity and ecosystems, and funding charitable civil society organizations.
A small business grant on the other hand is an opportunity given to an individual or group of persons that are looking to expand an existing business or establish a new business. Applicants of business grants may be awarded a partial grant to help expand a business or stimulate a failing business, or a full grant, providing enough financial resources to establish a business.
Applying for business loans
Another route taken by a large number of businesses is the business loan. There are several types of small business loans that a business can investigate further, among them:
- The small business credit card – This is possibly the best loan for a small business needing small amounts of money. The main reason for this is the ability to pay back the money borrowed within a few days, limiting the amount of interest the business needs to pay on the loan.
- The unsecured business loan – This type of loan is one of the most common. It is gained by signing a simple legal agreement between the lender and the borrower, with a pre-made repayment plan in place.
- The secured business loan – If the borrower has a bad credit history then this business loan type might be used. Being ‘secured’, these loans need some sort of collateral to loan against, such as property. As well as being used for people with bad credit, unsecured business loans are also often used where a larger amount of money is needed.
Depending on the lender that you go to there will be specific policies that need to be followed when applying for a loan. In general they are usually pretty similar from one lender to another.
When applying for a loan the borrower will usually be required to make the application by fax, mail or in person. Application forms will be available from the lender and can usually be downloaded online.