|
Finding
The Money
Finding the money to fund your new company (or an
existing company) can be an interesting experience.
A good business plan
can help you determine how much money you need to get
started. Truthfully, most new businesses are started
with the owner's own cash, credit cards, friends and
family, etc. without any type of plan whatsoever. However,
we've detailed some methods for you to find the money
for your new company.
We've broken down the sources of finding money to
3 areas:
1. "Bootstrapping"
2. Small Business
Administration or Bank Loans
3. Venture Capital or Angel Investors
The dictionary
definition of bootstrapping is "To promote and develop by use of one's own initiative and work without reliance
on outside help". Most small businesses are started with nothing
more than the owner's own money, work, and debt (usually
credit cards, home equity loan, etc.). This is
also jokingly referred to as "sweat equity".
To get their venture launched, entrepreneurs
have utilized many methods for startup capital, these
include but are not limited to:
- Credit Cards
- Friends and Family
- Home Equity Loans
- Personal Notes or Loans from a Bank
- Cashing in Pensions, IRA's, 401(k)'s, etc.
- Small Business Investors ( Corporations
and LLC's are perfect for this because they
can sell "shares" or "interest"
in the company to help fund the startup phase. NOTE:
friends and family can be investors as well. )
- Cashing in Stocks or Bonds
- Federal, State or Local Grants - click
here for a list of Federal Grant Resources
Many small businesses are started with the help of
a bank loan or a Small Business Loan from the Small
Business Administration (SBA). SBA loans are loans
from a private bank with the SBA as the "guarantor"
of the loan. This means that the SBA will absorb
some of the risk on behalf of the small business. To
get an overall view of small business financing and
small business loans, please visit the SBA's
site dedicated to financing your business.
Getting a loan from your bank is fairly straightforward:
simply call or visit your local bank (or a national
bank such as Citibank) and ask about the requirements
for getting a small business loan. Depending on the
bank, the loan process may be fairly easy or extremely
complex. To help you understand what this process
may be like and what it may require, please visit the
SBA's
page on borrowing money.
Recommended Site - BusinessFinance.com
- over 4,000 sources of business loans and capital
Recommended
Book - Financing
the Small Business: A Complete Guide (amazon.com)
SBA LOANS
There are basically 2 types of SBA Loans: the Basic
7(a) Loan Program which is the most used type of
loan the SBA offers and is available in amounts up to
$2 million dollars; and the MicroLoan Program which specializes
in loans for small business up to $35,000 dollars.
Click
here for information and help with applying for
a Basic 7(a) loan from the SBA
Click
here for information and help with applying for
a MicroLoan from the SBA
Recommended Book - The
SBA Loan Book by Charles H. Green (amazon.com)
| Helpful Tip:
|
| Forming a Corporation or an LLC is a great way of
creating a new business credit profile that is separate
and distinct from your personal credit profile (which
may be poor). In essence, this will
create a new "person" that allows you to build
up a pristine credit profile and enables you to receive
bank loans, lines of credit and credit cards that you
would not be able to acquire using your personal credit
profile. To
learn more about building business credit, click
here.
|
Some business ideas are so good and have so much
potential that obtaining venture capital may be the
way to go. In this process, the entrepreneur submits
his business plan to a venture capital firm (or more
than likely, knows someone who knows a venture
capitalist). The venture capital firm will review
the business plan and, if interested, offer to provide
startup money (usually well over $100,000) in exchange
for an equity stake in the company.
Anyone familiar with the "dot-com boom"
of the late 90's knows that this can be a long and difficult
process but the rewards can be astronomical. Companies
like Yahoo! and Amazon.com were funded in this manner
(and their founders are worth billions), as well as
many other companies you are familiar with: FedEx,
Google,
etc.
This is not to say that you need venture capital
to become a great company. Most of the large businesses
you are aware of started as a small business with
little or no help, then obtained venture funding or
"went public" after they had grown
relatively successful.
Another source is what is called the "angel
investor". This is usually a private investor
who has considerable amounts of money to invest in new
business ventures, the proverbial "rich uncle".
Most people don't have access to these types of
investors but we've listed some resources below.
Here are some great venture capital and angel
investor resources:
|
