Starting a new business from the ground up is both rewarding and exciting. You get to set your own hours and run the business your way without having to answer to anyone else. Unfortunately, one of the drawbacks to owning your own business is that in order to start, you typically have to have access to startup funds. The good news is that even if you don’t have much money saved up, there are other places you can use to secure the funds you need.
Borrow from Your 401K
If you have a 401K and you are fully vested you are able to borrow up to 50 percent of the available balance up to $50,000. Of course, you can start many types of businesses for much less than this. Another benefit of borrowing essentially from yourself is that you will eventually repay yourself in small monthly payments with interest.
Many people turn to the internet to secure funds when looking for a loan. Most companies that you will apply to use the same measures as a traditional bank, with one exception: online loan companies. The wait time for your approval is usually a day or two versus the standard week or two. In this case, online installment loans help you secure the money more quickly as long as you meet the lender requirements. Some even cater to people with bad credit.
Take a Loan Against Your Home
If you own a home and have equity, you can refinance your mortgage to secure the funds you need. Some people even opt to take a second loan, known as a home equity line of credit, against the home. Either one will get you the capital you need for your startup business. However the process can take a bit longer, in some cases up to a month or two, so use this time to hone your business plan and nail down the details.
Use Credit Cards
While borrowing from your credit cards shouldn’t be your first choice due to the much higher interest versus a traditional bank loan, if you don’t own a home and don’t have sustainable savings, they can prove to be worth the risk. What you can do if this is your only option for acquiring the necessary money, is make every effort to repay them quickly. This way you’ll reduce the accumulated interest with each payment to something that’s more manageable.
Ask Family and Friends to Invest
Another option you may have is to ask a family member or friend for a loan or better yet, to invest. If you have someone close to you who has the ability to do this, you can avoid paying hefty processing fees and a steep interest rate. However, if this is the option you choose, make sure to treat it just like any other financial obligation with a contract and clearly defined terms.
Venturing out on your own is risky and not all small businesses will succeed. However, if you have the funds secured and a product or service you are committed to, it can prove to be one of the best decisions you’ll ever make.