Financing Your Business Start-up
Unlike some, I feel better identifying the source of my startup funds before I start looking at businesses for sale. It gives me a comfortable feeling knowing what I can afford, saves me time and trouble by limiting what I look for in a business and provides me with a level of confidence to negotiate based on what I know I can afford. In addition to your own savings, commercial business loans (including SBA guaranteed loans) and borrowing from your family there are some creative options out there for securing the money you will need to start or buy your own business. One borrowing/lending option that is becoming more popular is known as Peer to Peer (p2p) lending. A p2p company arranges to connect borrowers with lenders. While some p2p companies only deal with loans between friends and family, others specialize in connecting true investors with borrowers.
1. LendFriend – LendFriend provides a platform for customers to lend and borrow among their friends and family members in a manageable way. They facilitate the loan process with an approach that puts the customer in control of setting loan terms.
2. Lending Karma – Another company that specializes in lending or borrowing money between people who know each other. LendingKarma can help you document, and track your loan quickly and easily.
3. LoanBack – Another ‘friends and family’ loan company with a simple process to assist borrowing and lending between friends or family members.
4. One 2 One Lending – Providing loan assistance and document preparation for lending and borrowing between friends and relatives.
5. WikiLoan – For lending and borrowing between friends or family members. When you borrow money from someone, especially someone you know, a lot of questions come up. It can be a very uncomfortable process for both the Borrower and the Lender. WikiLoan provides tools and promissory note to make the process go smoothly without embarrassment on either side.
6. Zimple Money – Yet another friends and family loan company, ZimpleMoney also can assist with seller financed real estate loans and loans and fund raising for non-profits.
7. National Family Mortgage, LLC – National Family Mortgage is America’s largest online resource for helping families properly structure and manage real estate loans with their loved ones.
8. Lending Club – If you don’t have a network of people you can ask for loans, the Lending Club may be a great alternative. Lending Club places your request in front of their own pool of investors/lenders. The rate of interest you pay is determined by Lending Club based on a rating or grade given your loan. The rate of interest on the loans can be as little as 7.37% with monthly payments over three years.
9. PROSPER – a p2p lending company providing an alternative to traditional loans and investing options. Prosper connects people who need money with those who have money to invest. How it works with Prosper: Borrowers choose a loan amount and purpose and then post a loan listing. Investors review loan listings and invest in listings that meet their criteria. Once the process is complete, borrowers make fixed monthly payments and investors receive a portion of those payments directly to their Prosper account.
Another option if you have funds invested in a 401K or IRA account is to use “a rollover as business startup” — or ROBS — as a tax-friendly way to tap your 401(k) accounts to buy or build a business. There are significant rules to be followed so you will need to hire a pro if you opt for this route to fund your business. Two of the better known companies specializing in ROBS and self-directed retirement plans are:
Guidant Financial Group Inc. — A financial-services firm that for a fee helps people purchase alternative investments, such as small businesses, inside their retirement plans as an investment, without taking a taxable distribution.
BeneTrends Inc. — A company offering services that help individuals tap retirement funds for business financing.
