You have an idea, youíve done the research, youíve finished the business plan, and you have an estimate of how much itís going to cost to get it all off the ground. The next step? Finding MONEY.† Donít let this be an obstacle to your dreams. Here are some places to look:
FRIENDS AND FAMILY
This is a time-honored tradition in some cultures and could be the best way to go, depending on your situation. However, exercise caution: your finances might become grist for the family rumor mill and you might create FRICTION if something goes awry.
Again, depending on how much you need, you could use the CASH ADVANCE line on a credit card as an unsecured line of credit (albeit an expensive one). Look low interest rates and cash advance fees. A recent Arthur Anderson survey of small and mid-sized businesses revealed that nearly 50% of all small businesses use credit cards in some capacity to get up and running.
Frankly, bank loans are tough for startups to acquire. Usually banks loan money to companies that are stable and profitable or whose officers have a successful business background. Theyíre not impossible, however. Make sure you have your business PLAN in order before approaching your banker.
PERSONAL OR HOME EQUITY LOAN
Since bank loans can be difficult for first time businesses, you might try getting a personal loan using your personal property as COLLATERAL. Thatís where 20% of businesses find their start up funds, according to a recent Arthur Anderson survey.
SELLING PERSONAL ASSETS
If you have antiques, jewelry, collectibles, stocks, or real estate on your balance sheet, you might consider SELLING them to get your startup funds. A recent news story I saw reported that the antique jewelry market has seen a surge lately as more and more people sell unworn heirloom jewels to finance business startups.
SBA GUARANTEED LOANS
If you live in the United States, you might be able to get the Small Business Administration to BACK a bank loan. That means that while they donít loan money themselves, the Small Business Administration will, upon reviewing your business plan, help you find and secure funds from the private sector. They do this by GUARANTEEING repayment of a portion of your loan to the lender if you default -- making your loan less risky to the bank. To learn more, visit the Small Business Administration site, www.sba.gov/financing/indexloans.html.† I donít know whatís available outside the United States, but you might try your local Business Information Centers, Chambers of Commerce, Employment Development Department, or similar entity.†
U.S. GOVERNMENT GRANTS
Get startup money from Uncle Sam? Absolutely...if youíre a United States CITIZEN. There are literally thousands of grants available for very specific types of RESEARCH, and itís how both Donald Trump and Ross Perot got their start. Youíll need to dig a little, but you can find a comprehensive list of grants at† The Catalog of Federal Domestic Assistance (aspe.os.dhhs.gov/cfda). Also try the Foundation Center (fdncenter.org) and Fundraising and Grant Writing (www.fundsnetservices.com/grantwri.htm) websites.
ANGEL (PERSONAL) INVESTORS
An Angel Investor is a person or entity willing to invest in your startup for a PERCENTAGE of the equity. You must have your research and business plan done before you approach them. Typical investments stay in the five figure range.† An Angelís biggest concern? Getting his money back. Angels also tend to invest in things they PARTICIPATE in, so approach people who are going to be the users, suppliers, or people within the industry or market area. Donít go after your technophobic lawyer to give you money for your mp3 idea, for example.†
Venture Capitalists look for highly profitable, very fast growing, early to mid-stage ventures. They seek almost IMMEDIATE returns on their money, which often include funds from wealthy individuals and institutional investors (i.e., pension funds) looking for a high rate of return. Often, theyíll want a lot of CONTROL, and will bring in their own people to ďrun the show.Ē Venture capitalists really like ďhotĒ industries (high-tech, Internet, etc.) and companies that are poised to go public.†
Want some other places to look? Check out these SITES: †
Diana Pemberton-Sikes spent more than a decade in accounting and business administration before starting Nifty Business Ideas in late 1999. Visit her website at www.niftybusinessideas.com. You may contact Diana at .
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