Funding Your Venture

So you have a no-fail business idea. All you need is the funding to get it off the ground. But where do you go to get what you need to get started?

A lot of new small business owners start with their own savings accounts, credit cards and home equity loans. This works great for smaller ventures. Just be careful as you are putting your own credit rating or retirement fund in jeopardy. If you use your home as collateral for the home equity loan, you risk losing that if your business does not succeed.

Friends and family are the next step for funding. If you choose this method, make sure you have it in writing as opposed to agreeing on a handshake. Work with an accountant or lawyer to draw up an agreement that specifies amounts, payback dates, etc. Check the wording of your agreement to make sure it is clear to your friends and family that this is a loan and not a business partnership.

A bank loan is harder to get for a new small business as most banks will require some sort of tangible asset for collateral. As you are just starting out, you don’t really have a business yet for that purpose. A lot of banks also require you to be in business for two years before they will give you a loan. But if you are a member in good standing with your bank, they may take a chance on your new business.

Crowdfunding is a new method that has proven successful. This method works by investor donation through various internet sites such as Kickstarter or Indiegogo. Usually a donation will be made in exchange for a small token from your business – a t-shirt, free meal, coupon for services, etc.

The competition for a government loan or grant is very steep. If you are a non-profit business or minority, or if your business will improve your community, you may have more opportunities to take advantage of this method. Check out the Small Business Administration website for further information.

http://www.sba.gov/category/navigation-structure/loans-grants

No matter what method you choose to pursue, you will need to have an updated business plan ready to go. Make sure you know everything there is to know about your new small business so you will be able to answer the necessary questions in order to get funding.

Funding is difficult to obtain for a new small business. But once you have your funding in place, you will be well on your way to fulfilling your dreams.