18% of all businesses fail in their first year, and about 50% fail after five years—that’s a disheartening statistic, but that also means that failing businesses is not really the end of the world. Your business may be on its last legs, but that doesn’t mean you should give up. Maybe all you need is a cash infusion for some heavily needed upgrades or stock.
A cash infusion is when a business receives a large sum of money, typically from an external source, in order to keep the business afloat. If your business is struggling, you may be considering a cash infusion in order to keep your business open. Here are some of the most common sources of cash infusions for businesses.
Personal Loans
One source of funding for your business could be personal loans. Personal loans are unsecured loans, which means they’re not backed by any collateral. This makes personal loans a riskier investment for lenders, and as a result, personal loans typically have higher interest rates than secured loans. However, personal loans can be a good option if you have good credit and you’re able to get a loan with a low interest rate.
Business Loans
Another source of funding for your business could be business loans. Business loans are usually either secured (or backed with collateral) or unsecured. The interest rate on a business loan will usually depend on whether the loan is secured or unsecured, with secured loans usually having bigger amounts and lower rates. Business loans can be a good option if you’re able to get a loan with a low interest rate.
The United States government offers a variety of loans for small businesses. The Small Business Administration (SBA) offers a wide variety of loans, including the 7(a) Loan Program, the 504 Loan Program, and the Microloan Program.
- The 7(a) Loan Program is a loan program offered by the SBA that helps small businesses get the financing they need to start or grow their business. The 7(a) Loan Program is a general business loan that can be used for a variety of purposes. You can use this money to buy equipment or inventory, refinance debt, and many other business-related purposes.
- The 504 Loan Program is a loan program offered by the SBA that helps small businesses buy commercial real estate or machinery and equipment. The 504 Loan Program is a secured loan that is backed by the assets of the small business. This makes it a lower-risk investment for lenders, which leads to lower interest rates.
- The Microloan Program is a loan program offered by the SBA that helps small businesses borrow money for startup costs or working capital. The Microloan Program is an unsecured loan that is available to businesses with less than $100,000 in annual revenue. This makes it a good option for small businesses that may not be able to qualify for other types of loans.
Mortgage
A third source of funding for your business could be a mortgage. A mortgage is a loan that’s used to purchase property. The property serves as collateral for the loan. Mortgages typically have lower interest rates than other types of loans because they’re backed by collateral. However, mortgages can be difficult to obtain if you don’t have good credit or if you don’t have enough equity in the property. Some small business owners have taken out mortgages on their house just to refinance their business. If you choose to take out a mortgage or a second one for this, make sure to consult local mortgage brokers. That way, you can shop around for a lender who can loan you the most amount for money for the lowest rate.
Investors
Another source of funding for your business could be investors. There are two main types of investors: debt investors and equity investors. Debt investors lend money to the business and are repaid with interest. Equity investors invest money in the business in exchange for an ownership stake in the company. Equity investors typically provide more money than debt investors, but they also expect a higher return on their investment.
Here are some equity investors that you can approach for financial aid:
- Friends and family
- Angel investors
- Venture capitalists
Crowdfunding
Crowdfunding is when a lot of people give money to a person or company so that they can do something. Crowdfunding is often used to finance new projects, like building a new business, creating a new product, or making a new movie. Crowdfunding can be effective because it allows people to invest in something they believe in. On average, successful crowdfunding campaigns raise $28,656. However, the success of your campaign depends on your business idea, your plan for reaching success, your transparency with your investors, the rewards and ROI you offer them, and the way you market the campaign itself.
Final Thoughts
Small businesses have a variety of options for funding their business. In this article, we’ve looked at three sources of funding: collateralized loans, unsecured business loans, and mortgages. We also looked at two types of investors: debt investors and equity investors. Finally, we explored the option of crowdfunding. Each type of funding has its own benefits and drawbacks that you’ll need to consider before making a decision. So which type of funding is right for your small business?
