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5 Effective Ways to finance Your Business amid the Pandemic

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Launching or running a business can be quite challenging during a pandemic. Last year was quite tough for most businesses as some went on a temporary hiatus while a few others closed permanently.

This year, some businesses have started to reopen and are now looking for ways to grow. Also, new business applications have surprisingly soared amid the pandemic restrictions.

However, there’s one key thing these businesses must take into consideration — financing. Whether they’re looking to launch a startup, invest in tools and technology, or expand their business, they need proper funding.

Fret not, as we’ve rounded up some practical tips for financing. Here’s how to fund your business during the pandemic:

1. Seek financial help from family and friends

The most practical option is to seek financial assistance from family, friends, or colleagues. You can borrow money directly from one of them and commit to paying your lender in the future. Also, you have the option to partner with one, so you both can pursue a business partnership.

This type of setup is particularly true for entrepreneurs looking to launch a startup or grow a small business. This option is usually for starters who don’t have enough credit to get a loan or consider a portfolio investment.

2. Invest in private equity

Private equity consists of investors who make a direct investment in a given business or company. These private investors can also buy out a business, boost its operation, and sell it for profit. As the name suggests, this equity comes from private investors or funds that aren’t listed on a public exchange.

Most institutional and retail investors have robust private equity marketing. As such, businesses that are financially struggling during this pandemic have the option to invest in private equity. What’s good about this funding option is its flexibility compared to traditional financing options. However, as a business owner, you must be critical of choosing a highly reliable private equity firm.

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3. Consider getting venture capital

Venture capital is actually a form of private equity. However, the difference lies in what business type the investors cater to. Most private equity firms suffice the financial needs of big businesses, while venture capital investors are for startups and small businesses.

If your business falls under the latter, it’s best to work with a venture capital investor. However, your business must have high potential growth and a promising market to attract these investors. On the other hand, look for a partner who shares the same visions and interests as you. That way, this partnership can ensure the growth and overall success of the business.

4. Apply for a conventional term loan

A traditional term loan is a business loan type that offers entrepreneurs or business owners a lump sum of money upfront. In return, the borrowers will have to pay the lenders overtime under certain terms and agreements. Lenders typically earn through either a fixed or a floating interest rate. In most cases, borrowers must put a down payment to reduce the total loan amount.

Term loans are ideal for small businesses. If you run a small business, you may get a short-term, intermediate-term, or long-term loan. This loan option is the best due to its simple application process, lump-sum cash, clear payment options, and low interest rates.

5. Get a Small Business Administration (SBA) loan

SBA loans actually fall under the conventional term loan. However, they are a more specific type of funding option that’s best highlighted. There are various banks, financial institutions, and lenders that offer SBA loans. These loans are readily available to provide funding and support businesses.

What’s great about most SBA lenders is that they offer low interest rates. In fact, their interests and repayment terms are more attractive and favorable than other loan types. SBA loan types include the Paycheck Protection Program (PPP), SBA disaster loans, small business lines of credit, and even small business credit cards. Whether you’re starting a small business or expanding it, an SBA loan can be your best bet. That said, check the SBA website to see a list of active lenders.

The COVID-19 pandemic doesn’t have to stop you from launching a startup or growing your business. If you need proper funding, be sure to consider one of the financing options recommended above. Whether it’s seeking help from people, investing in private equity, or applying for a conventional term loan, you can financially support your business and sustain it in the long run. Ultimately, be sure to seek financial advice before making a final decision, as doing so can make a difference in your overall business success.

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