Getting funding for startups is not an easy task, especially when startups have relatively new. As most financial institutions or banks are risk-averse the startups don’t view them as a means of raising funds, especially in the initial stage. (after angel investment and before series A). Due to the reasons stated the chances of getting funded in startups are slim.

But that’s not the end of the world. So presenting, 9 ways to fund your startup and to increase your chances of getting funded by choosing the one fit best your condition and need.

 

1. Small business Administration (SBA) and Bank loans for startup 

Traditional, bank loans and SBA loans are most difficult and slow to get funding for your business. This is because of banks risk-averse nature of banks and several institutes. Due to this nature of banks, the entrepreneur has to have relevant management and industry experience.

Qualification criteria for SBA loans. To get qualified for you need to meet the following criteria.

• High Company net worth
• Entrepreneurs to qualify for SBA loans needs to programs have invested at least 30% of their own money
• Real state with equity that can be used as collateral
• Robust business plans
• Credit Score of above 700

Advantages of SBA loans are as follows

• Low rate of interest
• Fixed monthly payment option spanning over years
• Range of SBA loans

The suitable stage for SBA loan: Entrepreneur in Series B and later stage have a good chance of qualifying for SBA loans.

 

 

2.Home equity loans line of credit (HEL/HELOC)

Used by over 25% of Small business owner in the USA to fund their businesses the Home equity loans line of Credits. The foremost fear for any institute lending money to the borrower is “repayment of the entire amount with interest” and because your funding is backed by the collateral (home), the approval is much faster.

Qualification criteria for Home equity loans. To get qualified for you need to meet the following criteria.

•  Lines of Credit are the best for the people who have more than 15% equity in their homes. (Why 15% ? because banks or Financial institutes limit the amount you can borrow to no more than 85% of the appraised value minus what you owe on your first mortgage)

Advantages of HEL/HELOC loans are as follows

• This type of loan has the lowest rate of interest as the loan is backed by collateral (a home)
• Easy and quick approval
• Approvals can also be granted on a Low Credit score of up to 650

HEL/HELOC loan amount

Most financial institutes will limit the loan to value for home equity loans combined at around 90 percent (90% of the value of the mortgaged property

The suitable stage for HEL/HELOC loan: As this loan is backed up by collateral there is no specific stage of approval necessary. An Entrepreneur with property or home to which he/she can keep as collateral can avail this type of financing at any stage of the funding cycle.

 

 

 

3. Business Credit Cards

Arguably the largest used means to finance businesses, around 35% of businesses use this as a means of financing.  Why is that? because Credit cards offer a lot more flexibility for payment compared to the other forms of financing. They are the most intuitive mode of payment when it comes to buying the item of lower ticket size. That also being a disadvantage, the smaller ticket size, as the credit card has its own limits there is a  limitation to purchase a high volume item in numbers.

Qualification criteria for Business Credit Credit card. To get qualified for you need to meet the following criteria.

Most of the time, there is a clause stating the responsibility and ownership lying with you. So you are responsible if the primary payer—which most likely means your business—fails to repay. It may be the case.

You need to have a healthy credit score to get qualified to receive a business credit card. Your personal credit score is one of the creditor’s best tools for measuring your financial responsibility.

Financial / Income statement to verify repayment capacity

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Advantages of Business Credit cards for financing your business are as follows

• Fixed Free Credit period
• Flexible payment option
• Cashback, rewards, and royalty benefits

Credit Card limit range

New Entrepreneur or Small-business owners had an average total credit limit of $56,100.

The suitable stage for Credit card loan: When in need of quick relatively small purchases.

 

 

 

4. Microloans

Microloans are private loans offered by a private company with not much of a documentation and collateral requirements. Entrepreneur or startups avail these kinds of loans to keep going, or as working capital for their budding businesses. These loans suit the startups or the entrepreneur with not so great credits or other loan options.

Qualification criteria for Microloans. To get qualified for you need to meet the following criteria.

• Should have a co-signer as a surety
• Independent income out of business like a full-time job or spouse’s income

Advantages of Microloan for financing your business are as follows

Easier to qualify and available in the span of 15 days

Funds to entrepreneurs and small businesses even when it is difficult for them to get funds due to lack of a financial history

The best option for the entrepreneur and start-ups to avail a microloan even with bad credits.

Microloan limit range

The credit range of Micro-loans ranges from $5000- $50000

 

 

5.Peer to Peer loans

Before crowdfundings like Kickstarter invaded your attention across the digital world, Peer to peer loans was the only option to get financing.

Qualification criteria for Peer to peer lending. To get qualified for you need the following.

• Healthy Credit score.
• Positive Income statement.
• Debt-to-income ratio, smaller than 36% (no more than 28% going).
• A credit score above 700.

Advantages of Peer to peer lending for financing your business are as follows

As the lending is peer to per there is no middleman resulting in the cheaper loans.

Funds lend by peer and so there is a true sense of community at a P2P lender which can be beneficial for future lending purposes.

Applying for Peer to peer loans will not affect credit score

Peer to peer lending range

P2P lending range is between $5,000 to $400,000

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6. Crowdfunding 

Crowdfunding is raising an amount of money from a large group of people (crowd). It happens mainly over the internet. There are platforms like Kickstart, Keutzal, Betabrand crowdfunding in generic as well as niche industries.

Qualification criteria for Crowdfunding. To get qualified for Crowdfunding you need to meet the following criteria.

Works best for visually appealing consumer products such as technology gadget, food, and beverages, apparels, funky home appliances or furniture etc.

Advantages of Crowdfunding lending for financing your Crowdfunding business are as follows

The main advantage a startup gets with Crowdfunding is that it receives debt-free loans

The crowdfunding amount can be overwhelming if it becomes viral or people see a higher potential in it.

Crowdfunding lending range

There is no range for crowdfunding, you can demonstrate your product, idea or concept over the net and if it convinces people they respond overwhelmingly.

 

7. Merchant Cash Advance (MCA)

A Merchant cash advance is a lump sum funding to a business in return for a percentage of ongoing future credit card and/or debit card sales. A Merchant cash advance is a short-term business loans merchant cash advance companies provide funds to businesses in exchange for a percentage of the business’s daily credit card income directly from the processor that clears and settles the credit card payment.

Qualification criteria for Peer to peer lending. To get qualified for MCA you need the following.

• Positive Financial statement
• Clean credit card statements with no delayed or skipped payments

Advantages of Merchant Cash Advance for financing your business are as follows

• Easy to avail loans
• Quick capital in case of urgency
• MCA doesn’t affect credit score

MCA’s lending range

Generally, an advance can range from 50% up to 250% of your business’s credit card transactions.

 

8. Venture Capital or VC’s

Venture Capital is private equity financing option, focused on start-ups and small businesses during early stage, after seed or angel investment stage. Typically looked upon as a long term investment. VC financing usually comes with selling or giving away stakes(ownership) by the owner or the founder of the company. It is a risky form of investment for the investor made with the hope that some of the firms they support will become successful.

Qualification criteria for VC capital. To get qualified for Venture Capital you need to meet the following criteria.

A Robust business model to show returns for the risk taken

Company profile and development path stating the company’s appreciated valuation down the line.

A clear defined path of the company with clear projections and miles stones to convince the Venture capitalist

Last but not least, company’s exit Plan

Advantages of Merchant Cash Advance for financing your business are as follows

For a startup company to raise money to the next level, it won’t be possible through bank loans or other methods

Repayment of VC investors isn’t necessarily an obligation (as equity is shared if successful and there is an exit plan in case of failure

Venture capitalists provide valuable expertise, advice and industry connections.

VC financing range

As a rule of thumb, the size of venture debt investment in a company is roughly 1/3 to 1/2 of venture capital (equity).

 

9. Revenue-based Financing (RBF)

Revenue-based financing or royalty-based financing (RBF) is a type of financial capital provided to an startup or a growing business in which investors invests capital into a business in return for a percentage of future revenues, with monthly payment increases and decreases based on future (monthly) revenues.

Thus, the monthly repayment depends on the percentage of the revenue earned until the loan amount is fully repaid.

Qualification criteria for Revenue based financing  To get qualified for RBF you need to meet the following criteria.

Minimum time in the business for at least 3 month

Startup or business earning a minimum of $7000

Business Statement

Advantages of Revenue based loan when financing your business are as follows

• Ideal for startups as minimum time in business  fast loan reimbursement
• Less revenue this month, repay less more revenue, pay more
• No collateral or equity sharing required

Revenue base financing range

You can get funded from $5000 to up to $5 million

Revenue based Financing is the best option for Startups with low growth capital, low credit score and requires fast loan disbursement.