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Personal Savings
Family Members and
Friends
Venture Capitalists
Angel
Investors
Banks
Industrial Banks
Advertising
Credit Cards
Small Business Investment Companies
Business Development Commissions
Life Insurance
Money Broker or Finder
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Banks.
Banks can be your least expensive route to raising
capital, as you can get loans that are just about 2 percent
above prime. However, you would need assets or profitable and
clean credit histories to avail of bank loans. In addition, some
banks may require established businesses to provide one third of
the equity injection and start-ups up to 50 percent or more. You
will also need to have a business plan with adequate
documentation demonstrating a projected cash flow that will
enable you to repay (on time) the loan with interest. You can,
in most
instances, borrow small amounts of money from local
banks for periods of up to three years. An unsecured loan requires only your signature, but more than
likely a secured note will be offered to you.
This has lower interest payments than an unsecured note,
but will require you to pledge some assets, such as stock, or to
have someone guarantee the loan.
The bank can also provide you with a credit line, which
is a revolving bank account secured against your inventory or
accounts receivable that allows you to draw funds against a
given total established by your bank.
Industrial Banks.
Industrial banks are usually much
more amenable to making business loans than regular banks, so be
sure to check out these institutions in your area.
Insurance companies are prime sources of long-term
business capital, but each company varies its policies regarding
the type of business it will consider.
Check your local agent for the name and directors of
another company to invest in your business.
Look for a company that can benefit from your product or
service. Also, be
sure to check at you public library for available foundation
grants. These can
bet he final answer to all your needs if your business is
perceived to the related to the objectives and activities of the
foundation.
Advertising
As simple as it seems, one of the
easiest ways of raising money is by advertising in a newspaper
of a national publication featuring such ads. Your ad should
state the amount of money you want-always for more money than
you need so you have room for negotiating.
Your ad should also state the type of business involved
(to separate the curious from the truly interested), and the
kind of return you are promising on the investment. On the Internet, several web sites offer match-up services
for investors and capital seekers. Garage.com, for example,
assists entrepreneurs in the high technology sector in securing
seed-level financing by presenting their business requirements
to a pool of high quality investors.
Credit Cards
Some entrepreneurs use several
credit cards to provide a substantial cash bankroll for the
business start-up. In fact, credit cards are used by nearly
one-third of start-ups. It is relatively easy to obtain, and
eases the bookkeeping systems. However, using credit cards to
launch a business is the least wise, since credit card money is
the most expensive money that you can borrow. If you intend to
carry a balance, the annual interest charges (12 to 21 percent)
are quite steep. While
credit card advances is one of the most commonly used sources
for start-up financing, it is dangerously close to gambling.
Small Business Investment
Companies
Don't overlook the possibilities of
the Small Business Investment Companies in your area.
Look them up in your telephone book under
"Investment Services."
These companies exist for the sole purpose of lending
money to businesses that they feel have a good chance of making
money. In many
instances, they trade their help for a small interest in your
company.
Business Development
Commissions
Many states have Business Development Commissions whose goal is
to assist in the establishment and growth of new businesses.
Not only do they offer favorable taxes and businesses
expertise, most also offer money or facilities to help a new
business get started. Your
Chamber of Commerce is the place to check for further
information on this idea.
Life Insurance
Another frequently overlooked
source of start-up funds is borrowing from life insurance. Loans
are almost always obtainable against policies with savings
features.
Money Broker or
Finder
These people take your prospectus and circulate it with
various known lenders or investors.
They always require an up-front or retainer fee, and
there is no way they can guarantee to get you the loan or the
money you want. There
are many very good money brokers, and there are some that are
not so good. They
all take a percentage of the gross amount that's finally
procured for your needs. The
important thing is to check them out fully; find out about the
successful loans or investment plans they've arranged, and what
kind of investor contacts they have all of this before you put
up any front money or pay any retainer fees.
Start
thinking about the idea of inviting investors to share in your
business as silent partners.
Think about the idea of obtaining financing for a primary
business by arranging financing for another business that will
support the start-up, establishment and development of the
primary business. Consider
the feasibility of merging with a company that's already
organized, and with facilities that are compatible or related to
your needs. Give
some thought to the possibilities of getting the people supplying
your production equipment to co-sign the loan you need
for start-up capital. This
is truly the age of creative financing.
The truth is this: Now is the time to make your move. Now is
the time to act. The
person with a truly viable business plan, and determination to
succeed will make use of every possible idea that can be
imagined. And the
ideas I've suggested here should serve as just a few of the
unlimited sources of monetary help available and waiting for
you!
Investment dollars are not out of the question for a home
business, but it isn’t a likely situation unless your business
has the potential to gain significant stock value. This also
means that your company will need to be larger than just an
extension of yourself. To attract investors, you will have to
make the case that the business could be sold at some point to
another person or company that could pick up where you left off
and continue to grow the business. If this is the case with your
enterprise, you might consider going through the pain to gain
investors, but be prepared to learn how the system works before
you send off proposals.
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