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5 ways to get funding for your business outside of your savings

When your business needs cash to survive, you may expect to borrow from your 401(k) account or other savings. This is called “bootstrapping” and it seems like a straightforward, “do or die” solution.

Unfortunately, some people may not have sufficient savings to infuse enough capital into the business. This can hamstring your company. Others may have the savings on hand but can’t afford to take the risk. Either way, you don’t have to go it alone — and you should definitely protect your personal assets.

Have you tried these 5 funding options?

Here are five funding options to consider, brought to us by Forbes:

Bank or credit union loan. If you have an established relationship with a bank, you may have access to significant funds through a standard business loan. The upside is that banks and credit unions may have a lot to lend. One challenge is that lending standards have tightened somewhat due to the downturn in the economy. Getting a standard business loan from a bank or credit union will require a detailed business plan and, to the extent possible, collateral. Or, you could be asked to personally guarantee the loan.

A loan through the Small Business Administration (SBA). These are still funds available at the SBA even though the Paycheck Protection Program is closed for the moment. You may qualify for a low-interest loan guaranteed by the SBA, which works because the guarantee reduces the risk taken by the lending institution. One downside is that the process can take a significant amount of time.

Mission-driven lending. A less traditional but still viable option is to borrow from a community development financial institution (CDFI) or similar program. The upside is that CDFIs often provide hands-on business guidance and mentorship throughout the life of the loan. The downside is that the amount available for lending may be smaller. Also, CDFIs often focus on startups.

Online lenders. This is an option that has become significantly more viable in the last few years. Some private companies like PayPal and Square lend to startups and existing companies. Micro-lenders may focus on helping members of certain groups get funding. Non-bank lenders may charge higher interest rates or have significant fees or penalties if you default. Be sure to educate yourself as to the repayment terms before you accept the loan.

Crowdfunding. It works for movies and personal projects, and it could work for you. The idea is to get small investments from a large number of sources. People may make donations in return for perks like branded merchandise. In such a case, you may not even have to repay the donors. The challenge is that crowdfunding can be time-consuming and uncertain.