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5 Different Funding Options for Startups & Their Pros and Cons



Although it’s difficult to pinpoint the precise number of new businesses launched each year, numerous studies have shown an increase in new business launches over the past decade. According to Oberlo, 4.4 million new businesses were started in 2020, up nearly 27% from the previous decade.

Starting a new business is easier than ever before. Within a single day, anyone can create an LLC and build an online presence. Technology has made it possible to turn entrepreneurial dreams into reality. However, the reality is that most businesses fold after a few years. Two out of ten businesses will fail within the first year alone.

One of the biggest reasons businesses fail is because they don’t have the money to continue operations. Most companies take years to become profitable and in the meantime, they rely on funding opportunities to keep them afloat. For entrepreneurs, there are several funding paths to choose from. Understanding the pros and cons of each can help you make a better decision for the future of your business:

Angel Investors

Angel investors are investors who use their personal money to invest in startup companies. Entrepreneurs who have some early traction and promising potential are uniquely positioned to attract angel investors. Typically, angel investors are willing to take a risk on companies (and founders) they feel confident in and are less concerned with personal credit, business history, collateral, or sales. Still, there are pros and cons to working with angel investors:


  • Early stage startups are welcome
  • No monthly payments required
  • Mentorship and guidance
  • Potential for additional future financial assistance
  • Quicker paperwork process (compared to traditional government financing)


  • Finding an angel investors can be time consuming
  • Angels expect rapid growth
  • Angels expect higher equity amounts (typically between 20% to 40%)
  • Reduced founder control

Bank Loans

When you think of financing and loans, banks are likely the first thing that comes to mind. Banks provide a variety of loan types to business owners who meet their qualifications. Bank loans work similarly to personal loans, where you’re charged interest on top of the loan amount you’re given. Payments are made over a specified period of time and are deducted automatically from your business account.

Every bank will ask to see your business plan before even considering a financing arrangement. Bankers will analyze your business plan with scrutiny to help them make a decision on whether to finance you. Business owners should take a look at an example of a business plan and consider working with a writer to create an effective business plan. Banks will also take a look at your personal and business credit.

Banks could be an ideal solution for long-term financing, but might not be viable options for individuals with bad credit or who need funds quickly.


  • Different lending options available to suit your needs
  • Low, fixed interest rates
  • Build your business credit
  • Flat-cost, predictable monthly payments


  • Long wait time to receive funds
  • Strong personal and business credit necessary
  • Lengthy paperwork process
  • Collateral likely a requirement


Crowdfunding is a great funding avenue for companies with physical products. Crowdfunding platforms like Kickstarter and Indiegogo allow entrepreneurs to connect with potential “backers” who help support business growth by contributing funds in exchange for various rewards. Many great products have used crowdfunding to jumpstart their businesses, including Pebble, SkyBell, and the Coolest Cooler.


  • Little financial risk
  • Ability to validate your market
  • Keep all your equity
  • Build your community


  • Campaign development is time-consuming and costly
  • Most campaigns do not reach their funding goal
  • Fees paid to crowdfunding sites eat into your profit
  • Only suitable for consumer-facing products

Startup Incubators

Startup incubators are programs designed to help startup founders accelerate the growth of their businesses. Programs are typically 3-4 months and include mentorship, office space, and small starting capital. How much money you can get depends on the program you join. One of the most popular programs, Y Combinator, offers $125,000 in exchange for 7% equity. Other incubators offer smaller funding options of around $20,000.

However, these programs offer indirect forms of funding in terms of opportunities they present. Most programs culminate in a Demo Day, where entrepreneurs have the opportunity to pitch their company to a room full of investors.


  • Early stage investment
  • Mentorship from experienced professionals
  • Free workspace
  • Access to business development programs
  • Opportunities to pitch to investors


  • Highly competitive application process
  • Lose some equity in your company
  • Structured schedules and obligations = less personal and professional freedom during program

Government Programs/Small Business Grants

Small business grants and other government programs provide financial assistance to small businesses and startups in need. There are hundreds of grants to choose from; you can apply to grants that target minority-owned businesses or grants that assist companies in specific industries. Some grants are better for growing businesses, while others are ideal for established business. And other programs target highly niche startups; for example, the Halstead Jewelry Grant Award offers $7,500 to jewelry startups. Do your research to find grants that work for you.


  • No repayment required
  • Variety of grants to choose from


  • Low financial assistance (you may need additional capital to supplement it)
  • Complex application and approval process

The financial assistance that’s best for you depends on the type of business you’re running and your financial circumstances. Do you need money quickly or do you have time to wait? Local brick and mortar businesses are more likely to opt for a bank loan than to work with an angel investor. Software startups might prefer an angel investor, while product-led startups might opt for crowdfunding. There’s no right or wrong answer, and as a business owner, it’s important to work through the fear of rejection. Early funding can mean the difference between success and failure. Weigh your options and make a list of your own pros and cons for each.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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