So you’ve got a great idea for a business that you really think will be a huge success. You’ve done your research and made a business plan, but now what?
One of the biggest challenges facing a prospective business owner today is financing. Where do you find the money? How do you get it? For the business savvy owner, there are many different options for finding the money to start your own business.
1) Friends and Family
This is the most obvious place to look for financing options. Many loyal friends and relatives are more than happy to put some money into a start-up business when asked by someone they love and trust. Remember though to expand your friends and family circle. Don’t just look to your immediate family members and best friends. Make a list of everyone you know, including acquaintances that you see infrequently, and then follow up with those people too. You never know who shares your interests and might want to put some money into a business they believe in.
2) Internal Financing
Personal loans and credit cards are great ways to get your start-up business off the ground with your own money. Some retirement funds will let you either borrow money from your account to be paid back like a loan or even let you roll over those retirement funds you have accrued over your lifetime into your new business’s retirement funds, to be redirected as you want.
3) Make the Money You Already Have Work for You
If you need a building for your business, consider leasing instead of buying or if you need to buy, finance the amount of the building over a long-term period. If you buy the building, you can even use the property value as backing for a loan. Also look at the suppliers you use for financing. Equipment suppliers may be willing to let you purchase equipment with a loan from the manufacturer or short-term credit may be available from suppliers who have seen you pay your bills on time before.
4) Small Business Loans and Grants
While not always a viable option, especially in the current economy, the government and many banks will provide loans or loan programs to small businesses. The United States Small Business Administration is a good place to start looking for loan programs that are backed, but not provided, by the government. The banks in your neighborhood may have similar programs where the bank provides the loan itself. Government and private grants are another way to raise money for your start-up but can be industry specific, such as healthcare or hi-tech. Make sure you do your research and apply for the grants that are best for you.
5) Partners and Investors
Finding a few partners and/or investors that share your interests and you get along with can be the key to successful financing. Not only do partners and investors give money, finding a couple of partners or investors can make you money in two other ways. First, they involve themselves in the business and have a vested interest in the business doing well. They may bring other types of experience to the business and this is helpful for getting your start-up going in the best possible direction. The second way partners or investors help make the company money is that many other financing entities (including banks, grants, trade associations, and venture capitalists) feel more comfortable giving money to a business that has partners and investors. Getting involved with trade associations that apply to you, attending conferences that invite people who share your interests or expertise, and subscribing to industry journals are three great ways to finding compatible partners and/or investors.
6) Look for Associations that are Looking for You
Some business associations specifically look for a certain type of owner or product to invest in and if they’re looking for you, you should be looking for them. For example, there are some organizations that give small business loans to women and minorities. Others look for very small companies with lower financing needs, while still more organizations seek out small business owners in certain industries. Many of these resources may not apply to you but looking out for the opportunity that does is still a good way to obtain financing for your start-up.
7) Angel Investors and Venture Capitalists
Finally, angel investors and venture capitalists are important if you are looking for substantial amounts of money and can expect high revenues in a relatively short period of time. Venture capitalists are institutional investors who pool money together into one investment in a company. Angel investors are essentially individual venture capitalists who use their own money to invest in companies. To find angel investors and venture capitalists, prepare your business plan and submit it to venture capitalist firms or clubs, angel groups (sometimes found by contacting your Chamber of Commerce), and institutions such as universities. Angel investors and venture capitalists don’t typically invest in many businesses a year so applying to many different places is your best bet.
Now that you’ve got your financing and you’re ready to start running your company, the next important step is making it official by incorporating. Let us get you started!