There are a lot of ironies when it comes to financing for startups. On one hand, qualifying for many loans requires having a good credit score and a certain amount of time in business. On the other hand, for your business to even build a credit score, you need to get some type of loan or lease. Helping your new business get through the first few years successfully is much easier when you have financing in the first place!
How can you make it through this confusing maze of rules unscathed and get the things your startup needs for success? Several types of alternative financing can help.
Equipment Financing
There are several great things about equipment loans and leases for new businesses. First, having high-quality equipment is a major boost for your company and your ability to generate revenue. This makes it easier to “play with the big boys” from the very beginning as a startup.
Another advantage is that you don’t need a high credit score or a huge down payment to get equipment with this type of financing. The equipment you want to purchase or lease takes the place of collateral required, which helps you qualify more easily. True, startups generally have higher interest rates than longtime companies, but the rates are comfortable even for small businesses.
With equipment financing and leasing, your new business can get virtually any type of equipment. This includes point-of-sale terminals, computers, office equipment, restaurant equipment, construction tools and equipment, plumbing equipment, cleaning equipment, and many other items.
Crowdfunding Programs
Crowdfunding refers to raising small amounts of capital from a large number of “investors” or supporters. Some businesses use crowdfunding from launch and others rely on it to spur growth via specific projects. For example, you could show your followers expansion plans and set a funding goal for purchasing certain equipment.
The tricky part of crowdfunding is having a large social media following and the type of personality that can motivate people to support you because they believe in you. You’re not just selling an idea, you’re selling yourself and your vision.
Microloans
Microloans are easier to qualify for than traditional loans, but you have to know how to use them wisely. Limit microloans to short-term needs you can pay off quickly, such as inventory purchases, hiring costs, and computers. These loans have higher interest rates, so they’re only to get you started until you have good cash flow.