Now you know your funding options. But how do you decide which one to get? Well, there are a few things you should consider:
- What you need funding for
- How much funding you need
- What your business’s qualifications are
- How quickly you need money
Let’s break those down.
The way you’ll use funding should factor into what type of funding you pursue. For example, a line of credit is one of the better solutions for cash flow problems. If you want to expand your startup into a bustling corporation, an angel investor might be more your speed. But if you just need to purchase a couple industrial mixers, an angel investor is overkill. So think about what kind of funding can help you meet your goals.
Likewise, take a realistic look at how much money you need. If you need over a million dollars, you probably shouldn’t try for a merchant cash advance—think a term loan instead. But if you just want to cover the cost of occasional office supplies, a credit card or your personal funding would work far better than an SBA loan.
And of course, you need to be honest about the strength of your application. If you’re starting a brand-new business, personal funding or loans from family and friends will probably be some of your best options. But if you’ve been in business for years and you have a good credit score, you’ll be better off with an SBA loan. So look at the qualifications for the kind of funding you want, and see if you can qualify.
Finally, think about when you need your funding. If you need cash now, then you don’t have time to hunt for an angel investor or apply for a grant; instead, you’ll probably want a line of credit or a merchant cash advance. But if you have enough foresight, then angel investors and grants are a great way to go.
Just remember that different funding types have different turnarounds. A line of credit can get funded in just one to three days, while a term loan could take up to a month, and securing a grant could take a year. So as soon as you know you need funding, start researching your financing option of choice and give yourself plenty of time to apply.