Securing capital financing in any economic climate can be challenging, whether you’re looking for start-up funds or capital to expand or money to hold on through the tough times. But considering the current economy, finding AND securing funds is as tough as it ever has been. To help you find the capital you need, here are some financing techniques and what you should know when going after them.
Get a Bank Loan
Lending standards have gotten much stricter, but the larger banks as opposed to community bank have supposedly earmarked special funds for small business lending. Doesn’t it then make sense to apply for this capital?
Use a Credit Card
Using a credit card to fund your business is a serious risk. Fall behind on your payment and your credit score will take a hit. If you only choose to repay just the minimum and mathematically, you’ll never finish paying. However, when used responsibly, a credit card can get you out of the occasional difficulty and even extend your accounts payable period to prop up your cash flow.
Tap into Your 401(k)
If you’re unemployed and thinking about starting your own business, those funds you’ve accumulated in your 401(k) over the years can look pretty tempting. And thanks to specific sections in the tax code, you can withdraw money without significant penalty if you know what to do and how to do it. The steps are simple enough, but legally complex, so you’ll need to set up a C corporation and the appropriate retirement plan to roll your retirement assets into.
Attract an Investor
When pitching an angel investor, like a VC firm, be succinct, avoid unnecessary words or explanations, and have an exit strategy. But the economic turmoil of the last few years has made this already complicated equation even more complicated.