Turned Down for a Bank Loan? 8 Ways to Get Startup Financing

Securing startup financing is the first step to starting your business, but for many people, procuring a traditional loan from the bank is simply not an option. If your credit history is less than stable, there is a strong possibility that the bank may deny your request for a loan. This is enough to dash the hopes of even the most resilient entrepreneur, but there are alternative ways to secure startup financing. If you have ever found yourself in this situation, you may be able to finance your dreams using the eight methods below.

1. Microloans

Banks usually subject loan applicants to stringent standards, but there are smaller, private companies that offer loans to small businesses. Many of these companies can provide you with a microloan (small loan) to finance your startup if you do not qualify for a bank loan.

2. Personal Savings

If you have money in your savings account, you may want to put it towards startup costs. Before you sink your funds into the company, be sure that you have a solid business plan to rely on.

3. Credit

 There are many entrepreneurs who utilize credit cards and personal loans in order to cover startup costs. If your credit history is stable and you can make the minimum monthly payments, this may be an option for you.

4. Purchase Order Financing

If you need the funds to fulfill a large order, PO financing companies may be willing to provide you with the money. They will accept repayment after you have fulfilled the order.

5. Crowdfunding

Crowdfunding involves finding a group of like-minded investors via internet platforms and convincing them to contribute small amounts of money to your startup. Crowdfunding has become a more acceptable form of startup financing over the past few years.

6. Family and Friends

If your family and friends support your dream to start a business, they may be willing to contribute some of their own funds. Before accepting the money of others, be sure to draft a concrete and realistic business plan first.

7. Vendor Financing

As a startup owner, there may be times when you need items for your inventory. If this occurs, many manufacturers and distributors may be willing to accept payment after your goods are sold. Their decision to do this will usually be based on your creditworthiness.

8. Self-Directed IRA

Investment Retirement Account funds can provide many people with the funds they need. See if you can use your IRA or 401(k) to cover startup costs.

If you need startup funds, but don’t want to involve the bank, consider using one of the methods above. This will free you from payments that accompany traditional bank-backed loans for good.