- I know my last business idea didn't quite work out, but.

- What was it again?

- Beard oil for dogs.

- Right.

- I call it Groomio and it's a guaranteed success.

Turns out there wasn't much market demand and the FDA called it unsafe and cruel.

But my new idea is certain to take off.

- Okay, let's hear it.

- Coffee made from root vegetables.

I'm calling it beet street cafe.

I've got everything planned out.

I just need one person to give me $200,000 to get started.

- And where are you going to find this person?

- Oh, don't worry.

They'll turn up.

(upbeat music) (coins clanking) Whether you're looking to purchase inventory, expand your staff or up your marketing game, business loans can provide the necessary cash flow.

It's a pretty simple setup.

You borrow a lump sum of money up front and then pay it back over time, with interest.

Loans that are backed by the US Small Business Administration are the holy grail.

Low rates, small down payments and long repayment terms are the norm, a winning combo for cash strapped entrepreneurs.

- But qualifying for an SBA loan isn't always so simple.

For starters, you'll probably have to demonstrate that your business has been around for a couple years and has a track record of reliable revenue.

- Wait, but doesn't being a new business mean that it's, you know, new?

- Yeah, it's kind of a catch 22.

You have to be profitable to qualify for funding, but most startups need funding to be profitable.

If you're just at the starting line of launching a new business, a regular term loan might be a better fit.

Interest rates are typically higher than SBA loans and your window to pay off your loan will probably be smaller, but it isn't as hard to qualify.

If that doesn't work out, you can look into a business credit card to unlock immediate financing, but be ready to use your personal credit to get approved.

- That's a super important detail.

Whether you're applying for a business loan or line of credit, lenders want some reassurance that you aren't going to take their money and run.

A strong credit score essentially tells them that you're good for it.

Some lenders might even require you put up collateral, like your home or your car, so that you've got some skin in the game.

Tread lightly.

If you default on your payments, the repo man could come knocking on your door.

- Anyone who's ever watched an episode of Shark Tank knows the setup.

An entrepreneur pitches their idea to a group of thirsty investors who will hopefully bite at the chance to get a piece of their business.

The winning shark then receives a slice of equity in exchange for funding.

This gives them an ownership stake in the company.

If the business does well, they'll get a cut of the action.

- It can be a win-win on both sides, but it's inherently risky for investors.

If the business goes under, the money they put in will go down with the ship.

It goes without saying that you'll wanna craft a killer business plan and fine tune your sales pitch before your pitch meeting.

The question then comes down to finding investors.

(doorbell ringing) - There are a few ways to go about it.

One option is to hit up friends and family who want to get in on your new business.

But if you're denied a loan from the bank of mom and dad, you can look to an angel investor for guidance.

These are individual investors who usually have deep pockets and a wealth of business experience.

Most will come in and play an active role in growing the company, from doling out capital to weighing in with business advice.

- Venture capital is cut from the same cloth, but works a little differently.

Instead of a single investor, you're working with a VC firm or fund manager that's looking to drop large chunks of cash into viable startups.

The entrepreneur plants the seeds with a great idea and solid business plan.

Then VC investors water the crops and watch them grow.

- Crowdfunding can be another way to pump cash into your new business.

You can go about it by trading ownership shares for capital, seeking good, old fashioned donations online, or swapping products or services in exchange for cash.

Crowdfunding is pretty legit and generates a lot of cash each year.

- This might sound kind of obvious, but you can also use your own money to bring your business idea to life.

Cash savings make for a quick source of capital, but be careful not to completely drain your emergency fund.

If your car breaks down or your roof springs a leak, you'll need to crack open that piggy bank to cover the bill.

What we're getting at here is that you always wanna leave a little cushion in your savings account.

- A personal loan might make for a better financing option.

They are structured like business loans and can unlock a one time pile of cash that you can use for whatever business expenses you want.

One downside is that interest rates are usually way steeper.

You're also co-mingling your business finances with your personal credit, which will affect your credit score for better or worse.

- We've really only scratched the tip of the iceberg when it comes to business financing.

Successfully funding your idea really comes down to your unique needs.

A small team operation that doesn't have much overhead, probably won't need as much cash as someone who's say, opening a storefront business.

- Your ownership stake plays a big role too.

While some entrepreneurs are happy to give up equity to get their hands on some much needed capital, others may be reluctant to invite more cooks into the kitchen.

- This is all to say that every business is different, but understanding your financing options is the first piece of the puzzle.

And if anyone out there wants to fund beet street cafe, that would be totally rad.

- Ish.