Starting a business can be expensive. Many people take out a business loan to help cover these startup costs, but is a loan always the best idea? Here are some questions to ask yourself that could help you to decide how best to fund your business.

How is your credit score?

Taking out a business loan will likely require you to have a good credit score. You can check your score online – if your rating doesn’t look good, you may want to consider taking measures to repair your score or find another form of funding altogether. There are lenders out there that will allow you to borrow money regardless of credit score, but these lenders often charge huge amounts of interest – you could end up paying back twice what you borrowed in some cases. An official business loan from a bank will charge you less interest and you’ll likely be able to borrow more.

How much money do you need to borrow?

Think about how much your business will cost to start up. If you’re starting a restaurant, there may be a lot that you have to pay for initially and a loan could be the best option for this. However, if you’re starting an online business, you may have little upfront costs and a loan may be unnecessary. There are business credit cards out there for those that may only need to borrow small amounts – some of these may also have lower interest rates than business loans, providing you pay the debts back within a certain period.

Could you save up the funds?

Saving up can be a long process, but you won’t have the issue of interest that you might otherwise have when taking out a loan. There are business savings accounts out there that can help you save – these accounts may collect interest allowing you save up the required funds more quickly. Saving up the money also gives you time to really plan out your business and you’ll feel more committed because it’s your money – taking out a loan could make you more impulsive.  Decide whether you think you have the willpower.

Could you seek out investors?

Another form of funding could be to ask for money from investors. This is usually done in exchange for future shares in business profits. You may be able to rely on online crowdfunding, in which multiple people all donate money to your cause. Alternatively, you could try targeting a single investor or investment company that can donate all the money you need. In order to convince investors to part with their money, you’ll need to come up with a convincing pitch so that people rally behind your cause.