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Financing Your Business Can be
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There are several options available to you when searching forfinancing. Some methods of raising funds are less difficult thanothers, but all require some planning. Basic planning requiresthat you know the answer to these three questions:
1. What will you use the money for?
You must know exactly where the money will be used. You must bespecific, as generalities are recipes for disaster. Carefullyidentify the areas where money should flow into your business.
2. How much money do you need?
You should calculate your needs to carry you through initialstartup and into your first several months of operation. It'snecessary to have a realistic picture of your needs. Manybusinesses fail because the money runs out before the businessreaches profitability.
3. How will you pay back the money?
You must have adequate cash flow from your business to repay themoney to your source. Before asking for funds, make sure yourfiscal projections and business integrity are soundly argued ina good business plan.
An integral part of a good business plan are financialstatements for your business. You need to show sufficient cashflow in your business for repayment. You do this withinformation as found in an income statement, a balance sheet,and a projected cash flow statement.
SOURCES OF MONEY
Here are some options for funding your small business:
Financing Your Business ==> Credit Cards
One form of personal debt you should avoid is cash advances onyour credit card. It's very tempting and very easy to get cashthis way. If you do this you should pray. Pray with vigor. Thenask for forgiveness. This option is very expensive and extremelyrisky. Credit cards should only be used for short-term expenses,and not as a means to entirely fund a start-up business.
Financing Your Business ==> Friends and Family
Borrowing from your friends and family, especially the richones, is a good way for new businesses to get money. It's notuncommon for relatives to make low interest or no interest loansto family members. Just make sure all parties are aware of anyrisks. You don't want to alienate your family if the businessfalls on hard times and you have trouble repaying the loan.
Financing Your Business ==> Personal Savings
You can use your personal savings or assets that can beconverted to cash. If your savings are already low, put off thatvacation, drive your old car a bit longer, avoid large purchases-- be thrifty in all areas and you can save faster for yourbusiness. Keep in mind that most lenders won't finance 100percent of your business, so you'll need to invest some moneyyourself.
Financing Your Business ==> Line of Credit
If you have good credit, you may be able secure a line of creditfrom your bank. This can be handy in providing you with a sourceof working capital in the opening round of your business.
Financing Your Business ==> Bank Loan
Using collateral, such as the equity in your home, you canapproach your bank for a loan against your business. This may ormay not be an option for you, since some banks prefer toseparate personal equity from business debt.
Financing Your Business ==> Venture Capital
People with lots of money love to make lots more money. Your jobis to convince venture capital providers that you and yourbusiness can help them make lots more money.
You must be able to show you've got a real winner. You must doit without fluff or a "come on, dream with me" embellishment.Therefore, you need a business plan. A good one that showsyou've done your homework and know the "lay of the land."
Venture capital providers want to be sure their investment issound. They generally do this by taking ownership over a prettybig part of the company, and often require control of majorportions of the business. This is so they can look after theirinvestment.
Do they mess around with the little guy? On the whole, theydon't want to fool around with little investments and they arebully on companies that have high-growth potential. Gotta thinkbig with these guys!
A few sites that help businesses and capital providers meet arevCapital.com, BusinessFinance.com, and vFinance.com.
Financing Your Business ==> Angels
An angel, or private investor, is a person looking for goodinvestment vehicles. This person could be your next doorneighbor, your dentist, or a local business owner. Overall,angels are not loan-makers, they are investors. As such, thedegree of control and terms under which you receive seed moneyfor your business will depend on the arrangement brokeredbetween you and your angel.
The key to finding an angel in your area is networking. Whileyou may not have an angel in your personal pool of contacts, bynetworking with others you can create a word of mouth campaignthat reaches the ears of private investors.
Moving outside of your local area, you can begin a sweepingsearch for private investors at BusinessFinance.com. Theymaintain a list of thousands of potential investors.
Financing Your Business ==> SBA Microloans
The Small Business Administration may be helpful in connectingyou with a Microloan. These loans are administered by non-profitorganizations that want to foster economic development in yourarea. Contact your regional SBA office for information on thisloan program. You can find your local office using this onlinelocator: http://www.sba.gov/regions/states.html
Financing Your Business ==> Small Business Investment Companies
The SBA or your local Chamber of Commerce may be aware of SmallBusiness Investment Corporations operating in your area. Theseorganizations are interested in reviving depressed portions ofyour community, bringing employment to places with highunemployment, or even helping certain minority groups. They willwork with new businesses if you meet the criteria they expect.You can visit the American Economic Development Council for alist of organizations in your area: http://www.aedc.org/
Financing Your Business ==> Business Incubators
Business Incubators help build new businesses. They can providehelp in all phases of start-up, including funding. Investigatewhether or not an incubator exists in your area with the SBA,Chamber of Commerce, local universities, or your localmunicipality.
Financing Your Business ==> Your Future Customers
Your future customers may be a source of money.
In the final analysis, the name of the game is perseverance. Getyour name and idea out there in the real world. Start talking topeople about your intent and become a player. Have your businessplan ready, be aggressive, and you can get the money you need.
About the author:Brett Krkosska provides 'how-to' advice on family and home-basedwork issues. Get start-up guidance, business ideas andinspiration at: http://homebiztools.com Free ezine subscription:mailto:enews@homebiztools.com
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