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How to Get Start-Up Funding for Your Business

June 8, 2011

small business fundingIf you want to open up a new business, you’ll need start-up funds. The more capital you have to launch your business with, the better off you’ll be. Raising those funds could be difficult, especially with the economy the way it is now. But where there’s a will, there’s a way, or so the saying goes. If you think it’s too hard to find funding you may as well give up the idea of starting a business–you’re already defeated. Instead, think positive. Make it happen. Following are a few tips on how to make that dream come true. All you need is a way to get start-up funding for your business.

Develop a Plan

Before you do anything else, take the time to develop a business plan. You have an idea; now you need to fine-tune it before you take the next step. You need to know where the money is going to go–what you’re going to spend it on–prior to actually raising funds. If you have money in hand it may cause you to jump in too quickly, and without a well developed plan in place you could end up spending the money unwisely. You should take your time, be patient, and know your destination before beginning the trek.

Use Your Own Cash

The idea of starting a business is intriguing to a lot of people. The thought of being your own boss, making your own decisions, is what many people strive for–to be in charge of their own destiny. In order to make that happen you need cash, and the best way to ensure your success is to use your own cash instead of borrowing. Unfortunately most people don’t have that kind of cash just lying around, but if you can open the doors to the business without a lot of debt you increase your chances of succeeding. If you’re sure, very sure, your idea is a good one; you may want to consider cashing in an IRA, a 401k, or a CD. If you have personal assets that aren’t necessary for your family’s survival, such as an antique car or vacation property, you may want to consider selling them for start-up money.

Borrow from Family

If using your own cash is not an option, your next best choice is to borrow the money. All through recorded history there are instances where starting a business was financed by family members. This could be an option for you. Usually you can get a much better deal from your parents or old Uncle Jim than you could from a bank or credit union. They many not even ask you to sign any papers, simply a handshake or your word could be enough to get you started.

Borrow from a Bank or Credit Union

If borrowing from a family member isn’t a viable option, you could try and borrow the money from an established lending institution. If you’ve come far enough in life that you’re seriously considering starting a business you’ve undoubtedly had dealings with a bank before this. With a business plan firmly in hand, it’s time to approach the loan officer at the bank or credit union you already do business with. Be prepared with a detailed breakdown of your plan–you will need to demonstrate your projected income and expenses. Hopefully your plan will show a healthy percentage of income over expenses, which will allow you to pay the loan back, with interest. You’ll be expected to put up some form of collateral, probably a house or land. If your credit rating is good, and your business plan convinces the bank that you’re a good risk, they should be willing to lend you the money.

Apply for a Grant

Getting a grant from the federal government may be out of the question, because those grants are usually reserved for non-profit organizations. However, a grant may be available on a local level. County, city, village, and township governments are always on the lookout for ways to improve the local economy. If you can convince them that you have a viable business plan but don’t have the money to finance it, you may be eligible for a grant. There may even be an investment group in your area that could help you get started.

Your Last Option–Credit Cards

Using a credit card to finance your new business venture should be avoided until you’ve exhausted all other options. The interest rates on most credit cards are prohibitive, and you will end up paying a ton of money to the credit card company that won’t actually go towards paying off the loan, and if you pay only the minimum each month you’ll never pay it off. Use a credit card only as a last resort.

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