By admin on September 21st, 2017 in Bootstrap
This Small Business Start Up Funding Encyclopedia is a quick, yet comprehensive reference guide, provided to help budding entrepreneurs find sources of start up funding for a new business. While many other financing options exist (such as invoice factoring and supplier financing), only those sources related to starting a new business are outlined here.
Traditional Sources of Small Business Start Up Funding
Unsecured Personal Loans
You can usually apply for an unsecured personal loan up to $ 100,000 from a bank, if you have an excellent credit history, low debt ratio and steady source of sufficient income. Another option may be to borrow from family members or close friends.
Private Equity Investors / Angel Investors
Private investor financing may be an option for you, if you are willing to give away equity ownership in your company in exchange for start up money. Essentially, a private equity investors owns a piece of your business.
Commercial banks offer start up loans which are usually secured on the owner's personal property or assets. Another option is an SBA loan. The US Small Business Administration offers several small business loan funding programs, which include the 7 (a) Loan, the Microloan and the SBA Express. Keep in mind that the SBA is not the direct lender, but operates as a loan guarantor. Excellent credit and a viable business plan are required for serious consideration.
The US government offers grant funding to select businesses, primarily engaged in education, health and human services, technology, or research and development. Please be advised that government grants are usually not a viable option for most start up businesses. A select number of private sector grants are also made available, from foundations, non-profit and for profit organizations. One source is Business Owner's Idea Café .
Typically, a group of seasoned investors that pool their resources into a managed fund. Venture capital is rarely offered below one million dollars, and usually only goes to start ups expected to yield a very high return on investment.
Non-Traditional Sources of Small Business Start Up Funding
Credit card financing is one of the most expensive forms of start up funding. If your business plans involve start up with the use of credit cards, you may be setting yourself up for failure.
Home Equity Lines of Credit
Home equity lines are one of the more affordable means of getting your start up funded. It involves borrowing against the equity value in your home. A home equity line should only be considered, if you have an airtight business plan. Failure to repay will put your home at risk.
If your new business requires the use of equipment or heavy machinery to operate, equipment leasing may be a perfect option for you. Leasing reduces the amount of start up cash you would otherwise have to raise.
Merchant Account Financing
This form of financing involves the selling of your future credit card sales to a finance company, in exchange for an immediate cash advance. My advice is to avoid this type of financing altogether.
Social Lending Websites
Peer-to-peer lending groups, like Prosper and Lending Club, match private lenders with credit worthy borrowers in an online setting. Loan terms and interest rates tend to be more favorable than traditional banks.
Start Up Contests
Start up funding contents may be an option for you if you are willing to do the online research it requires. Several private companies offer annual contracts which award cash and various business start up services. One such contest is the "Elevator Pitch Contest", sponsored by Start Up Nation.
Bootrapping is the art of building your business from the ground up, without the use of debt financing. This form of start up funding is embroidered by entrepreneurs desiring to minimize their risk. Bootstrapped businesses also enjoy higher long term profitability, than their debt funded counterparts.
Start Your Small Business TODAY!
I hope you have found this reference guide useful, in learning more about the small business start up funding options available to you. Did you know that you can start a small business, even if you have little money, poor credit, or do not own a home? Find free sources of business start up funding, and jumpstart your dreams of owning your own business – without BIG bank loans.
Learn more by requesting your free copy of "The Bootstrap Business Start Up Planner", by visiting my website.
© 2009 Kimberly Kelly – All Rights Reserved Worldwide.
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