New Business Funding 5 Top Sources

Need new business funding here are five sources
for financing your divorce services business.

Starting a new business is an exciting venture! You’ve done your homework, know your market, and are ready to push forward. But it does take some investment to get it going and keep it going until it starts to pay off. There are a variety of ways to obtain new business funding and here are five popular sources for financing your peaceful divorces services business.

1.  Personal Savings / Family / Friends

You should start with personal savings, as most lenders will want to see that you have “skin in the game”. They want to know that you are confident enough in your business idea that you are willing to invest whatever you can into it. Try to save up a substantial amount before jumping into the business.

After you have gathered your own savings, you may be able to get low-interest or no-interest loans from your family or friends. Be sure to put your agreements in writing, including the loan amount, the interest rate (if any), how you will repay the loan, and the repayment date or schedule. Also, be aware that there is a possibility that the business may not start turning a profit as soon as you would like, and if you have trouble paying back your loans your relationship with the lender could be strained. It might be best to discuss with family or friend lenders how such a situation might be handled.

2.  Peer-to-Peer Lending /Crowdfunding

Peer-to-Peer (P2P) lending is a way for people to borrow and lend money directly with each other. It is usually done on websites such as Prosper.com or LendingClub.com. If you want to borrow money, you agree to let the website do a credit check on you and to disclose your debt-to-income ratio. You are then assigned a “credit risk” score. Lenders can then elect to lend you money, but in pieces rather than one big loan. Thus, the risk is spread out over multiple lenders.

Crowdfunding is an evolution of the P2P lending model. In crowdfunding, a borrower can only get the loan amount if enough people agree to put up little pieces of it. If you don’t get 100% funding for your requested loan, you don’t get any money at all. For more details on P2P loans and crowdfunding, you may want to read this article by consumer expert Clark Howard – http://www.clarkhoward.com/news/clark-howard/personal-finance-credit/crowdfunding-offers-new-twist-p2p-lending/nCtcp/.

3.  Banks

If your credit score is good, you may be able to get a small business or consumer loan from a bank. For a business loan, the bank will usually ask for some collateral, and if your business starts to falter financially, the bank can ask you to immediately pay off the full amount of the loan. Most small businesses don’t have collateral, so if you own your own home a home equity loan is a good source of money, but remember you are placing the risk of losing your home should you default on the loan.

4.  Government-guaranteed Loans

The U.S. Small Business Administration (SBA, www.sba.gov) offers federally-sponsored debt financing programs for small businesses. It works in tandem with lenders by guaranteeing a portion of any loss the lender may incur on the loan, which makes lenders more willing to grant the loan. You can contact the SBA to find lenders in your area who partner with them. Interest rates can vary, so be sure to check with several lenders. For this type of loan, there are restrictions on the use of the money, and you must meet certain qualifications.  To qualify you will need to prepare a business plan.

5.  Local and State Economic Development Organizations   

These groups will probably not finance the entire amount you need, but they might lend you some amount that will fill in some gaps in your new business funding from other sources. So if you need $150,000 and the bank will loan you $125,000, a local government economic development organization may lend you $25,000 to make up the difference, usually at very attractive interest rates. Talk to your local Chamber of Commerce to find these programs.

Take Away
Funding your business properly is crucial to your success. Most businesses that fail run out of money just before they would have become profitable. Having enough money to last until your sales efforts kick-in and managing your cash flow are essential elements to having a successful business.

The Divorce With Dignity Network can give you some valuable ideas and tips on how to manage your divorce services business efficiently and profitably. Please visitPeacefulDivorce Business.com to learn more about how you can have your own successful peaceful divorce business. Occasionally we also offer funding options so you may want to contact us, also.

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