You wrote a great business plan and took it down to the local branch of a big corporate bank in hopes of getting a loan. The loan officer said you were too young and too inexperienced for them to take a risk on you. So what is a budding entrepreneur to do? Look for alternative loan sources, of course! Here are five places to start:
If you find a bank uninterested in your business plan, perhaps it would be a good idea to turn to your fellow entrepreneurs instead. While there are a number of web sites dedicated to matching applicants with peer lenders, you can also turn to members of your own community. Talk to established business owners and find out if they have any interest in financing your business or can recommend other potential peer sources to pursue.
2. University credit union
If you're not a member of your alma mater's credit union, become one now. Credit unions have long been good alternatives to larger banks for acquiring small business loans. Because members essentially own the credit union to which they belong, you'll likely find credit unions more accommodating than traditional banks.
3. Vendor financing
While vendor financing isn't a solution for raising all of your capital to start your business, it is a good method of procuring the big-ticket items you'll need to run your operations. Depending on your industry, you may also be able to turn to vendor financing in order to stock your inventory. Talk to your potential suppliers and find out if vendor financing is an option for you.
4. Borrow against assets
Many entrepreneurs take out second mortgages or borrow against their life insurance policies in order to gather funds for a start-up. While this isn't a viable option for the majority of young entrepreneurs who likely haven't built up many personal assets, it is still worth taking inventory of any personal items you could sell or borrow against in order to make a go of your business.
You may be so busy looking for money to borrow that you're overlooking sources that would be willing to simply give you the money you need to start your business. While grants aren't often easy to come by, they are out there and worth investigating. You will have a better chance of procuring a grant if you are starting your business in an economically depressed area; many states also have grants available for women and minority business owners. Business.gov may be able to match you with state grants (and other funding sources) for which you qualify.
While it can be disheartening to be turned down for a loan, many small business owners must try multiple sources before they receive funding. If you have a few unsuccessful attempts, make sure to use them to your advantage. Don't be shy about asking those who turn you down if there were any areas in your business plan or your pitch that need improving. Take any feedback into consideration and work on some revisions to your plan. The good news is, with so many different types of funding out there, you can keep trying until you get it right.
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