Where to get capital to start your own business
Thinking about starting your own business? If you're like most aspiring entrepreneurs, you'll need to figure out where to get the start-up capital. Every year, millions of potential business-owners fail to get their enterprise started because they didn't have the money themselves or know where to look for it. For many people on limited budgets, that initial investment is a barrier that stands between them and their dreams. Many great business ideas never come to fruition because of it.
However, getting this start-up capital, no matter how much is needed, is easier than a lot of people think. There are a number of different financial resources available to new business-owners; it's just a matter of where you look, the effort you put into it, and your overall attitude. If you're struggling to find the capital to start your own small business, use this list to make sure you've covered all your bases. You just might find an outlet that you haven't considered.
Family and friends.
Not everyone feels comfortable going to their family or friends for financial help, especially for business capital. But if you have a close relationship with certain people, and have built up a lot of trust, sometimes all you have to do is ask and they'll be happy to help you out. Instead of simply asking for the money outright, you may want to consider offering part-ownership in the company for their investment fund. That way, your friends and family will be even more enticed to invest, knowing that they could earn a portion of profits if/when the business succeeds. If you're not comfortable offering shares of your business, you could also propose a specific timetable for when you'll pay the loan back. This will show your friends and family that you're serious about paying the money back and confident that your business will succeed.
Small business loan.
Although the process can be long and intimidating, getting financial help from a bank is still one of the best ways to get the start-up capital you need. Banks are happy to provide small business loans to qualified individuals, because it ultimately means more money for them over the long haul. However, you need to be extremely well prepared and show with clear evidence that you have a profitable business idea that just needs help with initial funding. If you choose this route, be ready to create a professional business proposal with numbers and statistical information about your business and industry. For more information on small business loans, check out http://www.sba.gov.
Government grant.
Government grants are like loans, except in most cases you don't need to pay the money back. Each year, the government awards over $500 billion in grant money to businesses and individuals. There are a number of grant programs available for small businesses, so it's just a matter of searching and applying. For more information on federal grants, visit http://grants.gov/
Venture capitalists.
Did you know there are hundreds of companies out there who are waiting to invest in the next great business idea? Every year, these companies shell out millions of dollars to aspiring business owners in exchange for part-ownership of your company. In their eyes, if they can invest in the right business, it will pay off big later on. Granted, most small home-based businesses won't require this level of investment, but the resources are there if you want to implement your enterprise on a much larger scale.
Savings or retirement money.
This is a tricky one, because it's not a good move for every entrepreneur. But for many people, taking a little bit of money out of your 401K or IRA may be exactly what they need to get their business off to a great start. Before running off to your financial adviser, be sure you're aware of all the risks. Do you really want to use money that you're going to need to live off one day? Are you confident enough in your business to risk losing that money forever? Are you ready to incur special taxes and penalties for withdrawing these funds before retirement? Weigh your options carefully. Again, a small withdrawal might not cause any harm. But the more money you take out, the more you're setting yourself up for potential disaster later on.
Home equity loan.
If you already own a home, you may be able to take out a loan based on the equity of your home. But again, this type of loan carries a lot of risk. You are essentially putting your home on the line, willing to give it up if you are unable to repay the money back. Like the other bank loans above, this route will also require some careful planning, research and a professional business proposal.
