Yesterday we discussed Everything You Need to Know About Investors for Your New Online Business, so today I am going to share with you alternatives to investors:

The absolute best alternative was already discussed in yesterdays post, which is building the business 100% on your own using whatever funds you have available. Start small and grow your company $1 at a time. This way you will always have full control of your business, not burn relationships with loved ones and not have to add onto your monthly bills the expense of financial repayment. You will also avoid potential problems such as lawsuits over the inability to repay. I strongly encourage you to read yesterdays post because these problems are covered in depth.

If you don’t have any money the truth is that now is indeed a bad time to start a business. If your bank account has a $5 balance you honestly should wait a bit and save. Once you get your balance up to $1,000 you can reconsider using some of those funds to buy a small quantity of inventory to sell on a marketplace site to help grow your savings. But if you absolutely insist that now is the time your next option is to use PayPal Credit Financing. The reason this is the second best way to go is because there is no interest for 6 months. PayPal Credit Financing is based on your credit score, so if you have terrible credit and also no money, honestly, owning a business likely isn’t a good fit for you. I know, it sucks, but it’s truthful. The number one reason so many businesses close within the first 5 years is running out of funds.

Your third option is to use the ol’ credit card. Keep in mind, if you cant pay that money back within 25-or-so days you will be hit with interest and the interest will endlessly compile and you will essentially be pissing away valuable money. I cannot emphasize how important every cent is going to be while you build your company.

You’re probably wondering why Credit Card is #3 instead of the common advice “just get a bank loan” - this is because it’s not that easy. The bank likely isn’t going to loan any money for you to start an online business, open a Poshmark store or buy some inventory for eBay. The people who suggest bank loans have little-to-no idea what they are talking about. The bank is well aware of the failure rate of small businesses and they want to be repaid. Additionally, not paying the bank is a very dangerous game.

Fourth, if you have a credit score of 620 or higher you can try to apply through SmartBiz.com. SmartBiz is an online platform where you can apply for a Small Business Administration (SBA) loan which can be dispersed in as little as a week. Unlike other online financing offers which often only provide shorter term loans to businesses, SmartBiz offers a 10-year loan term, an interest rate of 6 percent and loans from $5,000 to $350,000. The good thing about SmartBiz is that the longer term loan involves a smaller monthly payment. Collateral is not required for loans $25,000 or less. The bad news is that a personal guarantee is required. Loans between $151,000 and $350,000 must be fully collateralized. This means if your business fails, which nearly half do within the first couple years, you will still be responsible for repayment and your collateral will be seized (house, car, etc). If you absolutely, positively want to go this route I would strongly suggest starting with the $5,000 (or smallest amount possible) and see how that goes. IF you can quickly repay it, without issue, then consider reupping for a larger amount. 

Next, if you haven't read Everything You Need to Know About Investors for Your New Online Business, do that now.  If you have already read it, Read more about starting an online eCommerce store.