Small businesses are the real drivers of the American economy. There are between 25 and 27 million in the United States and they employ about 60% to 80% of all workers. While the Small Business Administration (SBA) backs small business loans for entrepreneurs to start new ventures, insufficient capital is the second leading cause for failure among new companies. Many people who want to start a new company need a loan to do so and they look for unsecured business funding to get them started.
Unsecured business loans are loans that are not backed up by real estate or other collateral to back them up. They tend to have higher interest rates as a result. Financial experts recommend that entrepreneurs look to following sources for funding:
- Traditional banks: Most people looking to start a business begin their search for funding at their own financial institutions. The drawback to this is that even though the economic conditions are more favorable now than they have been for finding small business success, banks are cutting back on lending to start ups. If you want to get unsecured business funding, the best place to start might be with a community bank or local credit union. They are more likely to offer working capital loans for small business for start ups that are in their community.
- Ask the government. The SBA does offer help for entrepreneurs. The caveat is that people who seek this assistance have to prove they cannot get working capital loans with reasonable terms from other sources. These working capital loans for small businesses typically have more favorable terms than what banks offer. There is a lot of paperwork and the approval process may take a long time but it is something worth looking into.
- Start a crowdfunding campaign. New sites like Kickstarter and Indiegogo have made it possible for people to get direct funding from people on the internet. People are offered certain incentives such as equity in the new venture and other items related to the new brand to show appreciation. These platforms also offer a great chance to spread the word about the new company idea. These sites also may lead to more funding later as a successful crowdfunding campaign can attract venture capitalists.
- Ask friends and family. Many people, including Donald Trump, get help from their family and friends to start their businesses. Even if you cannot secure the million dollars Trump got from his father, your family may be able to loan you some money to get your business off the ground.
You may also want to talk to to officials in your local government and your representative in Congress. They have case workers in their district offices who work regularly with government agencies. Your business may qualify for grants or other programs offered at the city, county, state or federal level. Ask because if you do not, they cannot say “yes.”
If you have an idea for a small business but do not have the funding to start it, there are options and ways you can get the unsecured business funding you need to succeed. Do your research and write up a solid business plan. It will take a lot of time and work but you can turn your dream of owning your own business a reality.