Getting approved for a small business loan from traditional lenders or the SBA is difficult. A growing number of businesses are securing funding through online lenders. By FINSYNC    What do restaurants, auto parts stores and essentially all businesses have in common? They can't survive for long without some combination of cash or financing. A significant lapse in cash flow, for example, could jeopardize a restaurant's ability to buy the ingredients it needs to serve the dinner crowd. And retailers may be able to stock some of their shelves on a consignment basis, but they still need to fund their payroll, pay rent, cover operating expenses or make more ambitious moves, like opening up new locations. Cash flow can fluctuate unpredictably, especially for startups and small businesses, which is why many small firms rely on credit cards and business loans to keep the doors open. Loans backed by the Small Business Administration can offer attractive interest rates, but that won't help if you don't qualify. And meeting the requirements for a conventional business loan from a traditional lender can be difficult, especially if your business is just starting out or you have a so-so credit history. The Decline of Small Business Lending Traditional small business lending contracted sharply following the U.S. financial crisis in 2008 and has been slow to return to pre-crisis levels. Small businesses still find it difficult to get financing from traditional lenders, in part because many community lenders — traditionally a key source of small business financing — shuttered after the crisis. Nearly 20% of small businesses report being denied credit, according to a survey by the Kauffman Foundation.  And those business owners who get approved for a loan or line of credit often don't receive the full amount that they were seeking. More than half of small businesses that applied last year for a loan of $250,000 or less received a smaller amount, according to the Federal Reserve.  The typical reasons for being denied financing are low credit score, too much debt, not enough collateral, insufficient credit history and weak business performance. An Attractive Alternative    Small business owners who have been denied loans from traditional sources may have better luck getting financing from a bevy of alternative lenders that have emerged in the last decade.     These non-bank, online lending companies offer individuals or small business owners options with less stringent requirements. Many do not require collateral. These lenders are a big factor in why the number of small businesses that say they're able to access the capital they need has been rising in recent years, according to the National Small Business Association.    Business applications to online lending companies have been increasing, with some 32% of applicants turning to online lending in 2018, up from 24% a year earlier, according to the Federal Reserve.    The U.S. market for alternative business loans is expected to hit $350 billion by 2025, according to research from Balboa Capital. Easier To Qualify    Applying for a conventional business loan typically requires firms to have a good credit score, provide collateral and present their business plan, in addition to turning over all manner of financial records, including tax returns and bank statements.     Alternative lending companies don’t always need to see financial statements and will accept average credit scores. They're also more likely than traditional lenders to lend smaller amounts. Another perk: Their online application process tends to be faster and easier. That's one reason 54% of businesses with riskier credit profiles are more likely to apply to an online lending company than a small bank, according to the Federal Reserve.    Some Caution Required    Getting approved for financing by an alternative lending company may be easier, especially if your credit score isn't stellar, but business owners must weigh that against the possibility they may have to pay higher interest rates and loan fees.   Many alternative lenders charge significantly higher interest. Consider that annual percentage rates, or APRs, from banks and credit unions range from about 4% to 13%, while loans from online loan companies can run between 7% to more than 100%, depending on the risk, according to financial data firm ValuePenguin. One reason for the higher APRs is online lenders' financing terms tend to include sharply higher fees for loan processing.     Alternative loans can be a lifeline for your business during hard times or a supplement to more traditional sources of financing that have fallen short of your needs. But always consider the cost-benefit ratio, especially if the alternative financing being offered is too expensive.     To ensure you're getting the best rates available, check out FINSYNC's lending network. Businesses that use FINSYNC's integrated accounting and cash flow management software can easily apply for a loan free of charge and immediately receive offers with competitive rates from multiple alternative lenders that are ready to extend them financing.
Top 5 Reasons It’s Crucial to Manage Your Cash Flow Why cash flow analysis may be the single most important area for small business owners to focus their efforts. By FINSYNC Who has time to manage their company’s cash flow when there are bills to be paid, products to be made and inventory to order? We get it. Small business owners are among the busiest, hardest working people out there. While managing your cash flow can feel like a daunting task, it doesn’t have to be — and even minimal effort is well worth it. Consider these 5 reasons why cash flow analysis is crucial to the success of your business.
  1.  Qualify for a Small Business Loan
Access to working capital is a challenge most small business owners face at some point. Getting a handle on your cash flow can significantly improve your chances of getting approved for a small business loan. While different types of lenders have different requirements when it comes to qualifying for a loan, one common factor unites them all: cash flow. The strength of your company’s cash flow is one of the primary factors that lenders consider when reviewing your loan request In addition to a history of positive cash flow (when more cash is coming in than going out), lenders are looking very closely to make sure enough money is coming into your business to cover all of your regular business expenses plus a loan payment. Now that you know what lenders are looking for, it’s crucial to shore up your cash flow before applying for a loan. With a little foresight and regular cash flow analysis, you can make sure your cash flow is ready for scrutiny — and will give lenders the confidence they need to grant you a small business loan.
  1.  Learn from the Past
Taking stock of where your business has been is an invaluable exercise when it comes to managing your company’s cash flow. This is an opportunity to learn from mistakes, spot trends and plan accordingly. Analyzing the numbers from past cash flow statements will allow you to quickly pinpoint shortfalls, recognize seasonal trends and identify unexpected costs along with unpaid invoices that may be affecting your cash flow for any given period. Cash flow analysis doesn’t have to be complicated. FINSYNC’s intuitive online tools can automatically track your cash flow and help you visualize patterns with charts and other helpful graphics. These tools make it simple to tackle one of the keys to managing your cash flow: timing.
  1.  Avoid Unexpected Shortfalls
Unnecessary strains on your cash flow are often a simple matter of timing. Once you have a clear picture of past trends and patterns, you can schedule payments based on your projected cash flow to avoid crippling shortfalls. In addition to helping you plan ahead for seasonal business fluctuations, cash flow analysis can help you identify when your customers are submitting their payments so you can adjust your outgoing payments to suppliers accordingly. If you spot significant lag time between when you invoice your customers and when their payments are coming in, you may consider ways to get paid faster. A crucial part of cash flow management is timing your incoming and outgoing payment to avoid dips into the red — and make sure both your employees and suppliers get paid when they’re supposed to.
  1.  Plan for the Future
Cash flow projections are key to anticipating upcoming business needs and timing payments to avoid shortfalls. They also provide you with a level of visibility that allows you to avoid guesswork and make better business decisions. Forecasting may also help you qualify for a small business loan. Showing lenders where your company is headed with the help of their funds can greatly improve their confidence in your business — and in your ability to repay the loan. Perhaps most importantly, tracking the trajectory of your cash flow will allow you to capitalize on timely opportunities and plan for growth.
  1. Stay in Business
If you’re still not convinced that managing your cash flow is worth the effort, consider this unsettling statistic. Perhaps you’ve heard about the number one reason small businesses fail? You guessed it: cash flow. A whopping 82% of businesses shutter due to cash flow problems. Just because your business is profitable doesn’t mean you’re in the clear. An unsettling number of profitable companies fail simply because they run out of cash. When there’s more money going out of your business than coming in, you’ve got a serious problem, no matter how profitable you are on paper. FINSYNC makes it easy to manage your cash flow, with intuitive tools that do the hard work for you. It’s just one more way that getting your finances in synch can help your business succeed.
Responding to loan requests with a simple “yes” or “no” is an outdated way of doing business in this digital world where relationships are more important than ever. By FINSYNC The lending landscape has changed drastically over the past decade, and banks that don’t adjust to the changes sweeping the industry may be in for some real challenges. Traditional bank loans are no longer the only option for small businesses in America, as the growth of online lending has given business owners a new avenue to secure financing. The Rise of Online Lending Back in 2015, the SBA reported, “A new generation of online lenders is surfacing with the promise of an efficient, streamlined application process with quick turnaround times and higher approval rates.” The report went on to note that borrowers spend a mere 30 to 60 minutes on online loan applications, which can be funded in a matter of days, whereas the traditional loan application process takes an average of 26 hours and may not be processed for weeks or even months. More recently, a 2018 report on small business lending in the U.S. detailed how a handful of the largest small business lending platforms are filling a financing gap for small business owners. NDP Analytics, an economic research firm based in Washington, D.C., reported that five online lending platforms alone funded $10 billion in online loans from 2015 to 2017, which generated $37.7 billion in gross output, creating 358,911 jobs and $12.6 billion in U.S. wages. Needless to say, we’re far from business as usual in the banking world when it comes to small business lending. The Opportunity of Online Data Access to online financial data streamlines both the loan application and approval processes, benefitting both lenders and borrowers alike. However, there are many more benefits to unlock in this newly charted territory. What if access to a business’s financial data could open up a dialogue between lender and borrower in a way that elevated the interaction from a mere transaction to an ongoing relationship? Along with the ease and access that online banking offers, small businesses in America are looking for more out of their lender than a simple “approved” or “rejected” response. Beyond “Yes” or “No” As we all know, a solid relationship is based on an ongoing dialogue rather than a communication dead end. What’s true in life is most certainly the case in banking. For far too long, the conversation between lenders and their clients has ended with, “No, I cannot help you with financing.” What if the conversation — and relationship — could continue, even when a bank opts not to finance the loan? The payoff, of course, is a long-term relationship and all of the future business that comes along with it. Banks and credit unions in FINSYNC’s Lending Network are given three options every time they receive a loan application to review:
  • First, the member bank can assess the financial data provided by FINSYNC and opt to approve the loan for their own balance sheet.
  • If the bank determines that the business isn’t quite ready for traditional bank financing, the lender can seamlessly share the application with another member lender that’s prepared to approve and fund the loan on behalf of the bank.
  • If the bank determines that the business is not ready for financing at the present time, they can show the business how to get where they need to be. As part of FINSYNC’s cash flow management solution, the bank can communicate milestones and actionable steps that the applicant can take to qualify for financing in the future.
FINSYNC Makes it Easy to Evolve FINSYNC makes it simple for banks and credit unions to graduate from the old binary way of banking. Participating in FINSYNC’s lending network helps banks connect with their customers online to strengthen these all-important relationships and ultimately fund more loans. Currently, both traditional and alternative lenders are joining FINSYNC’s lending network at a rate of one new lender per day. This number is rising rapidly as more banks begin to see the growth opportunities that the new lending landscape offers. We’ve made it as easy as possible to get started. FINSYNC uses established data connections to banks, so there’s no need for IT investment or laborious integration. In fact, we’ve gotten some lenders enrolled and up and running in as little as an hour. The future of banking is about relationships backed by the power of online data that can benefit both lenders and customers alike.
How Business Banks Can Become Business Partners In order to survive — and thrive — in changing times, banks need to evolve from the limited role of being a business bank to becoming a long-term business partner. By FINSYNC Would you rather be seen as a business bank or a business partner? Most banks, if not all, would opt to be a true business partner. But what does that mean, exactly, and how do you get there? Even the most well-intentioned banks often don’t understand what it takes to build a true partnership. The key? Technology that adds real value. Elevate your relationship from a common business bank to a highly valued business partner with tools that can help both you and your customers grow. The Limitations of Business Banks What’s wrong with being a business bank? Nothing, of course, other than its obvious limitations. Business bankers are common, and easy to fire. A partner, on the other hand, adds value and is much less expendable. Traditionally, the interaction between a business bank and its customer ends with a yes or no response, as in “yes, we can help you with financing” or “no, we cannot help you.” Binary banking represents the old way of doing business and, in our opinion, is on its way out. For a business bank to become a true partner with their client, this dead-end dialogue must be expanded. Business partners can do much more for their clients than simply finance a loan. When harnessing the power of technology, deepening these relationships to partnership status requires banks to invest minimal effort and resources. What it Means to be a Business Partner According to a recent FDIC report, anywhere from 77 to 89 percent of business banks don’t offer their customers the ability to apply for financing online. Beyond the convenience and ease of connecting with clients via the web, access to financial information online can help banks build a mutually beneficial partnership that can grow with the client. A business partner is an advisor that can help steer a small business along the path to success. Sound complicated? It’s not when you have access to your client’s financial information through a platform like FINSYNC. If your client doesn’t qualify for a loan, for example, the conversation doesn’t have to close with a “no” that does nothing to continue the conversation. Instead, FINSYNC lenders can tap into historical financial data to analyze their client’s cash flow in order to show the business exactly where they need to be in order to qualify for a loan in the future.   Armed with this valuable information, a business is given an actionable goal that comes with the assurance of qualifying for financing, should that goal be met. And therein lies the value of a partnership. Partners for the Long Term This type of guidance from a business partner lays the foundation for a long-term relationship as opposed to a one-off interaction that often ends with a discouraging “no, we can’t help you.” When the conversation continues with, “Here’s where your business needs to go to qualify for financing,” the applicant not only has a roadmap to follow, but knows exactly where to go for funding when they’re ready. Better yet, for both the bank and their customer, when you’re connected through a lending network like FINSYNC, there’s no need for the business to re-apply for the loan. When they hit the numbers laid out for them, qualifying for a loan is as simple as one click. The same goes for a business that has secured a loan previously through the FINSYNC Lending Network. When the applicant needs additional access to funding, they can secure a loan with a few quick clicks in a matter of minutes, significantly reducing the effort required by both the bank and their client. There’s no new application for the bank to review, as the relationship has already been established and the online financial information speaks on behalf of the business. These types of streamlined transactions save time, resources and frustration on both sides, and make for the kind of partner relationship that businesses expect in today’s digital world.
From long-term, low-interest-rate loans to quick cash you can secure with shaky credit, learn about five popular ways to fund your small business. By FINSYNC Finding a small business loan that suits your specific needs — and you can realistically qualify for — can be a tricky prospect. The best type of loan for your business depends on several factors, including how long you’ve been in business, what you’re going to use the funds for, if you have collateral, and how healthy your credit is, to name a few. Learn about five popular options that may be available to your small business, depending upon your specific situation. Term Loan When you think of a traditional bank loan, you’re likely thinking of a term loan. Issued by a bank, these loans have fixed interest rates and are paid back via monthly or quarterly payments made over a defined period of time. If you’re a well-established business with excellent credit and solid financials, this may be the most favorable loan you can get. Term loans tend to have the lowest interest rates, and you can borrow a large amount of capital. However, they can also be difficult to qualify for, and you can expect an in-depth application process — something to keep in mind if you need cash in a hurry. Term loans also generally require collateral. Business Line of Credit The difference between a term loan and a business line of credit boils down to flexibility. With a line of credit, you use it when you need it (up to a set limit) and only pay interest on what you use. You have the freedom to draw from your line of credit whenever you need to. Lines of credit can provide the security of a cash cushion for your business, which can be especially helpful if your cash flow tends to fluctuate or you frequently face unexpected expenses. A business line of credit may be fixed or revolving. The latter works a bit like a credit card combined with a cash advance. Once you repay what you’ve borrowed, your line of credit resets and you may borrow up to your limit again. A fixed line of credit doesn’t reset once you’ve used it. Like term loans, lines of credit can be difficult to qualify for, though you’ll have a good chance if you’re an established business with excellent credit. Equipment Loan Does your business need a new printer? A delivery van? Perhaps you’re starting a food truck? Equipment loans are worth considering, as they can help you purchase both new and used equipment. The beauty of an equipment loan is that the equipment itself serves as collateral. Unlike many other types of loans, it generally makes no difference if you’re a brand new business. If something happens and you can’t repay the loan, the lender is entitled to the equipment itself. Invoice Financing If you’re in the business of invoicing customers, you’ve likely encountered some cash flow issues caused by late payments. Invoice financing allows you to borrow money against the amount of money you’re owed, so you can get the cash immediately — without having to wait for your clients to pay up. Borrowing against your unpaid invoices can be as simple as a click and you get funds fast, which can help you avoid cash flow dips that may make it difficult to pay your vendors or even your employees. Like equipment loans, invoice financing is also less difficult for new businesses to qualify for. Is your credit less than stellar? We’ve got good news: The credit of your customers matters more than your own with this type of loan. SBA Loan The Small Business Administration helps businesses that may have difficulty qualifying for a term loan by teaming up with banks to guarantee part of the loan. This win-win situation reduces the risk for banks and allows more businesses to qualify for low-interest-rate loans. While SBA loans are open to new businesses, long repayment terms and low interest rates mean that they’re highly competitive. There are several types of SBA loans. The most popular is the SBA 7(a) loan, a flexible loan up to $5 million that small businesses can use for nearly any business purpose. If you need funds for commercial real estate, to renovate your business or for equipment, consider a SBA CDC / 504 loan. In this program, a bank funds up to 50 percent of the loan while a nonprofit certified development company (CDC) covers up to 40 percent (you’re responsible for the final 10 percent of project costs). In order to qualify, you’ll need to occupy at lease 51 percent of the space you’re funding. If you want to borrow $50,000 or less, the SBA’s Microloan program may be for you. For this type of loan, the SBA partners with community-based non-profit lenders to offer smaller loans. The average Microloan is for around $13,000 and has terms up to six years. Streamline Your Efforts Don’t let the variety of loan options out there overwhelm you. Online tools like FINSYNC simplify the loan application process by connecting you with a diverse lending network that offers a variety of loan types — via one simple application. Simply tell us the purpose of the loan and what type of collateral you have (if any), and we’ll do the rest.
By FINSYNC Getting rejected for a small business loan is practically a rite of passage for entrepreneurs. Rejection rates can be as high as 73 percent with traditional banks. The odds improve a bit with alternative lenders, who generally approve around 57 percent of small business loan applications, but the rejection rates can be disheartening. Ready for some good news? Lenders reject loan applications for the same often-avoidable issues over and over. When applying for a loan, it helps to think like a lender. Consider five common reasons small business loan applications are frequently denied, and take steps to avoid these common pitfalls.
  1.  Not Enough Time in Business
Traditionally, banks require you to be in business for at least two years, though an exception may be made for a (highly competitive) SBA loan, part of which is guaranteed by the government via the Small Business Administration. While there’s not much you can do to speed up the clock and get more business history under your belt, you can look beyond traditional banks. Alternative lenders, including FINSYNC’s lending network, tend to have a less stringent requirement for time in business; one year is generally sufficient — even less in some cases. It’s also worth noting that accuracy is important when reporting time in business on your loan application. Experience in a similar industry does not equate to time in business, and should not be treated as such when applying for a loan. What lenders want to know is how long the business that’s borrowing money has been in existence or incorporated. While including past history may be a seemingly innocent error, this type of misrepresentation can easily cause your application to be rejected.
  1.  Asking for Too Much, or Too Little
We know what you’re thinking: Can asking for too little capital really hurt your chances of securing funding? In a word, yes — depending on whom you’re asking for the loan. Traditional banks commonly issue larger loans, on which they earn more interest. Banks may be less likely to approve smaller loans that are under around $250,000. Why? It’s all about the numbers. It takes banks the same amount of time, effort and resources to service a seven-figure loan as it does a five-figure loan, on which they make much less money. Alternative lenders, on the other hand, commonly lend smaller amounts than commercial banks and the application process is generally much faster and easier. However, it’s crucial that you prove you can pay back the amount you’re asking for on your application. Asking for too much, without showing the lender exactly how you plan to repay the loan, will get your application rejected. If your current cash flow isn’t strong enough to comfortably cover the loan payments for the amount you’re requesting, you’ll need to detail future projections to show exactly how you’ll get there. Increase your chances of getting approved for a small business loan by adjusting the amount you ask for, based on who you’re applying with, and be prepared to prove that you can cover the amount you request.
  1.  Poor Credit
Both your personal and business credit can affect your chances of getting approved for a loan, along with your interest rate should you get approved. Lenders often view the credit scores of majority stakeholders as a reflection of the company’s ability to repay the loan. The newer your business (and shorter your history), the more closely your personal credit will be considered — especially if you have not yet established business credit. If you’re applying for a loan from a commercial bank, or an SBA loan, your business credit will also be taken into account. Always check both your personal and business credit reports before you apply for a loan, and fix any potential errors that may be dragging your score down. If either credit score is low (below 600 for personal credit), it’s a good idea to take steps to improve it before applying for a loan. If you’re worried about your credit for any reason, consider applying for a loan from an alternative lender. These lenders are generally more lenient when it comes to credit scores, and pay closer attention to cash flow as an indicator of your creditworthiness. If you have poor credit, you may also want to consider invoice financing, or borrowing against your unpaid invoices. With invoice financing, your payee’s credit is weighed more heavily than your own.
  1.  Weak Cash Flow
When it comes to qualifying for a small business loan, cash flow is king. Lenders want to see that your business has enough positive cash flow to cover your operating costs — plus loan payments. Traditional lenders will consider at least one to two years of your cash flow history, while alternative lenders may look at as little as three months of your bank transactions. Lenders also look at your ability to maintain a positive bank balance, and ideally a balance that’s increasing steadily. If more money is going out than coming in, or the margin is too tight, your small business loan application may not be approved. Need help improving your cash flow? In some businesses, getting paid faster is key. No matter what industry you’re in, a little planning and analysis can go a long way. Intuitive online tools can help you visualize, plan and manage your cash flow — and even detail future projections that prove to lenders you can repay the loan amount you’re requesting.
  1. Lack of Planning
When you apply for a small business loan, it’s important to make a strong case for your business that removes any doubts a lender may have about your ability to repay the loan. Always define how you plan to use the capital to grow your business, and include a convincing business plan that explains exactly how you will repay the loan. You won’t give lenders much confidence without laying out a plan for the funds you’re asking for. Being conscious of these common reasons small business loan applications are denied, and taking steps to avoid them will help improve your chances of getting approved. And if you don’t? We’re here to help. Unfortunately, nearly a quarter of all applicants who are denied for a small business loan have no idea why they were denied. At FINSYNC, not only will we tell you exactly why your loan wasn’t approved, we’ll show you the steps you need to take to get approved.
When a traditional bank loan is difficult to secure, consider these diverse ideas to get access to the capital your startup requires. By FINSYNC As an entrepreneur, getting your business off the ground is one of the most difficult challenges you’re likely to face. In the early days, when you’re up and running but not quite yet established, capital to keep things going can be seemingly impossible to come by. Traditional bank loans can be especially difficult to secure, as financers generally require at least a year or two of business history, along with a solid cash flow. What can you do when your startup needs money now? Good news, you have options. Consider these six ways to fund your new business, from traditional avenues to others you may have overlooked. Equipment Financing Does your new business need a delivery van? A copy machine? A pizza oven? You may qualify for an equipment loan, even as a new business. While banks traditionally only extend financing to established businesses, equipment loans can be slightly easier to come by — and may even carry a lower interest rate than conventional loans. Why? The rule with this type of loan is that it can only be used to purchase — you guessed it — equipment and machinery. This can be less risky for lenders because the equipment itself serves as collateral; if you default, the lender can take your equipment to cover the loan. Invoice Financing If your business invoices its customers, and you need funding fast, invoice financing may be a viable option for your startup. In invoice financing, a lender loans you money against the invoiced amount that your customer owes you. This can be especially helpful if you have a long payment cycle and can’t afford to wait for your customers to pay their bill. Invoice financing can also be easier to qualify for than traditional loans. Lenders often don’t require a long business history, and approval is generally based on your customer’s credit rather than you own. Your own credit and cash flow are secondary. You can also get funds fast, and the application process is fairly simple. With FINSYNC, you can essentially turn invoices into cash in one click — and your customers will never be notified that their invoice has been financed. SBA Microloans If you don’t need a large loan (over $50,000), consider applying for a SBA Microloan. For this type of loan, the Small Business Administration partners with community-based non-profit lenders to offer small business loans. These loans generally feature low interest rates because the government guarantees a portion of the loan, which reduces risk for the lenders, especially when financing startups. Low interest rates and accessibility for new businesses make SBA Microloans competitive, but you may have a leg up if you run a minority-owned business or operate in a disadvantaged area. SBA Microloan lenders focus on local communities, and often go beyond funding to provide business-based training and technical assistance. Business Credit Card If you have limited business history and solid personal credit, a business credit card may be a good way to finance your business. In addition to your credit, issuers will take a look at your combined income (business plus personal). The better your credit, the lower your APR will be. Beyond being fast and easy to apply for, business credit cards offer other perks. Ideally, you want to pay off your balance in full every month to avoid paying interest. If you have good credit, shop around for a 0% interest introductory offer to buy yourself some time so you can comfortably carry a balance for up to 15 months. You can also look for a card that offers a cash back percentage or awards points. Bonus: A business credit card helps you build up your business credit and establish that all-important business history. Small Business Grant While securing a small business grant from a non-profit or government organization isn’t easy, this “free” money (without interest or fees) can be well worth the effort — especially if you run a non-profit or mission-oriented business in a community that’s served by this type of funding. Many grants are available for women and minorities, and the SBA offers a variety of grants as well. Keep in mind that small business grants are highly competitive and the application process can be lengthy, so this may not be a viable option if your business needs money fast. Self-Funding Though not without its risks, self-funding your new business is worth considering if you don’t qualify for other types of financing. Always use caution when tapping into any form of your personal savings, or borrowing money from friends and family. If your business is incorporated, you may have the option to borrow from your retirement funds with Rollovers as Business Start-Ups (ROBS). This option allows you to use funds from your IRA or 401K (without immediate taxation) to cover new business start-up costs. Downsides include high fees, increased IRS scrutiny and, of course, the risk of losing your retirement savings. If you have excellent personal credit and solid income, a personal business loan may be an option. Just remember that your personal assets are on the line if you default. The same goes for a home equity loan. While this may be a viable source of funding for your new business, you’re at risk of losing your home if your business struggles and you’re unable to make your loan payments. Bottom line, a traditional loan that may seem out of reach isn’t the only way to fund your new business. Think strategically to access the capital you need to keep your business running in the often challenging early days. And always be sure to weigh the risk and effort involved when considering sources for funding your startup.
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