There are two ways to get capital for business start ups. First is you can do an acquisition or the second is a loan.
Buying a business is a complex process that entails a lot of due diligence that the buyer must go through. There is a possibility of the company being overvalued because of the limited disclosure they provide.
Loan financing is simple and quick. You can do a SBA loan, Fed Loans, USDA loans or SBA Loans through a private lender. Usually the amount that you want is $300,000 or less and the interest rate ranges from 9% to 15%.
The downside to this type of financing is the lender is getting you money. They will be collecting their money back at the end of the loan. With an acquisition loan you would own the company.
You get the equity of the company in exchange for the money. This is usually what you want if you are going to acquire a business.
The only negative aspect of loan financing for business is the amount of paperwork that needs to be filled out. This can get onerous for the business owner not knowing where to start so for the most part loan financing is for start ups.
Both of these methods of financing are excellent ways to get capital to start up a business.
If you have $300,000 to invest in a new business, then a purchase loan or Fed loan is the way to go. If you have less capital, then a loan is the way to go.
With a loan you need to have a well designed business plan that shows that you know what you are doing. With a purchase loan you simply need a business plan that makes the lender interested.
If you need financing for your business start ups, then the government is still your best bet for capital to get your business going.
You can use the SBA for funding through direct lending. SBA loans require you to have been through a counseling session with the SBA and that you will follow certain guidelines to receive financing. The interest rates are not that bad.
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