You've had a great idea that could really pay off. The only problem is - you need a considerable amount of money to actualize it. So, the logical thing to do would be to look for a loan. The thing is - there are many ways you can get a loan. You first need to find out what options you have available in order to decide which one suits your specific situation best.
1. Turning to your family and friends
Let's start from the obvious. Many people consider this option as their closest ones are the easiest one to convince to give you money. However, this should actually be your last resort. It's not just about whether you'll be able to give the money back in time. It's also about whether you will ruin a relationship in the process. It's difficult to be sure that you will be able to pay them back in a specific period of time. So, it's best to ask them only then when you really don't have any other option and you're pretty positive you'll get the money back in time.
2. Government lenders
Most of the time, the government is willing to help aspiring entrepreneurs with good business ideas. Their aim is to improve the local economy through aiding new business and creating new jobs, meaning there will be more taxpayers. Government loans also have better conditions than those from independent lenders because they will also have a lot of benefits from your business. However, you need to be eligible in order to ask a government loan, so the first step is to see if there are any programs in your country or state.
3. Venture capitalists
Venture capitalists are ready to invest in an idea they think is great and that could bring them money, too. So, if you opt for them, you will actually get more than just money for developing your idea. As their return will depend on the amount of success of your company, it's probable that they will be much more interested in your company than most of the other lenders would be. This means you would get free advice and guidance from an experienced businessman.
4. Peer-To-Peer (P2P) lending
The first good thing about trying to get online personal loans like this is that the borrower can choose who they want to give their money to. In this case, the best option is to look for P2P lenders in your region or area. If at one point your business thrives, you can pay some of the money back by becoming one of the P2P lenders. Of course, the option of knowing who is getting the money doesn't mean that only the safest ideas will find their lender.
5. Opting for a credit union
If you choose this option, be ready for various checks which will depend on the amount of money you want to borrow and the available offers in the credit union. The first thing that they will check is your credit score. It is a complex algorithm that predicts how likely it is that you will be able to make the payments on time. What you need to know here is that your credit score will also affect the rate of your next insurance, among other things. Still, there are some credit unions that don't take the issue of a lower credit score so seriously. However, they will have some stricter terms, for example, interest rates.
Additionally, there are specific types of credit unions that ask for a different type of insurance. The collateral is usually in question here. In this case, you will have to use your asset as a safety deposit in case you're not able to repay the loan when the time comes. In other cases, credit unions ask for a fiscally solvent acquaintance (usually a close friend or even a business partner) that will vouch for you in case you can't repay the loan.