Starting a small business is a dream that many people fantasize about, yet few actually bring into reality. Many would-be entrepreneurs get stopped dead in their tracks as soon as the question, “Where will you get the money?” crosses their minds.
Fortunately, there are actually many ways to find money to start a small business. Here are the most common sources.
Start With Your Own Resources
Not everyone can fund their entire startup themselves, but you will likely need to at least put some cash up front before qualifying for a loan. So start with yourself.
Most small business owners will start funding their new business venture by cutting personal expenses, liquidating some assets and saving up cash. This makes sense, since your new business is like your baby – of course you’re going to invest in yourself.
But how much of your personal resources will you commit?
Be careful about putting all your eggs in one basket and ask yourself a few questions before betting the farm on your new business idea.
Do you have any experience in this industry?
Have you run a successful business before, especially one of this type?
What will happen to you and your family if the business fails and you lose everything? Will you risk losing your personal assets too, such as your home, vehicles and cash/investments?
Some entrepreneurs put it all on the line and win big. But many who go that route crash and burn, so give it some careful thought and perhaps get some professional advice before risking everything.
Get Help From Friends and Family
The next place many think of when finding money to start a small business is family and friends. If you’ve got a solid business idea – and solid relationships with friends and family – then you might be able to collect a decent amount of startup capital quickly. Some of them might even want to go into business with you, while others won’t want to get involved directly.
Think about this before you ask anyone you know for money. Some partnerships are made in heaven. But others are doomed from the start. So be firm if you don’t want anyone else calling the shots with you. And be aware that bringing money into your personal relationships could forever change those relationships.
Sometimes it’s worth it.
Sometimes it’s not worth it.
Head to the Bank
Your local bank, where you likely already have one or more personal accounts and banking products, is another good place to find money to start your business. You can apply for a business loan with a fixed payment plan. You can also apply for a revolving line of credit and/or credit card for your business.
You’ll want to separate your personal finances from your business finances, so you’ll probably need to open business checking and savings accounts too. So it would be convenient to group all of these under one roof.
Try Alternative Lending Sources
For those entrepreneurs who already have stellar credit and cash flow in their personal lives, the above sources are often enough to get their business funded and launched. But what can you do if your credit history and current income are not as excellent?
Many turn to alternative lending sources such as crowdsourced online lenders and smaller lenders.
You can also try getting a loan from the U.S. Small Business Association (SBA). There are also government and private grants available, some of which may be demographic based. A quick Google search will bring up many possibilities.
If you’re a small business owner starting your first company – or even your fifth company – contact First Source Capital to see what financing options are available to help your business succeed.
