Starting a business takes capital, and if you do not have that capital lying around, you’re going to have to look into securing financing. There are many ways to secure financing for your small business, but there are also some types of financing that you should avoid.
THREE Types of financing you should avoid
- Cash advances and payday loans. First, if something seems too good to be true, then it probably is. Cash advances and payday loans have that effect. On the surface, they look like a good idea, but when you start looking at the percentage ratings, they can be startling. Cash advances and payday loans have incredibly high-interest rates, and when you start using them, it can be impossible to recover.
- 401(k) loans. Next, you should also avoid financing your business through your 401(k). Your 401(k) is a retirement account that will come into play once you get older. Even though 401(k) loans carry relatively low-interest rates and are technically tax-free money, you are essentially robbing yourself of a comfortable future to deal with the monetary issues of today.
- Personal loans from family. Finally, even if you have the best family in the world, it’s a bad idea to accept a personal loan from them. You can have your family member be an investor in a business or they can donate money to you outright, but expecting to pay them back can put a strain on the relationship if the business does not succeed as you planned.
Owning your own company is a rewarding experience, but when you talk about opening a business, you can’t escape the discussion of money. Money is the reason why most businesses fail in the long run, and if you are trying to avoid getting off on the wrong foot, it is important to know what type of financing you should avoid. If you are interested and securing a traditional or SBA loan, you can contact Aspen Commercial Lending to see what kind of financing options are available for your business.