1. Self-funding - You provide the capital necessary to start your business with your own savings and assets.
2. Friends or relatives often have money to invest. The loan can be structured so that there is a benefit for everyone involved.
3. Line of credit - If you have an asset that is valuable a bank will establish a line of credit for you. People use their homes as the asset or if you are already in business your business could be that asset. With a line of credit you might have access to $100,000 but you pay interest only on the amount you actually use.
4. Personal loan - A bank gives this type of loan based on your borrowing history and credit you have established with them or based on an asset you own. With a line of credit you only use what you need and pay interest on that. With a personal loan you get the full amount and pay back both the interest and principal over time. Whenever the loan is secured by your home, proceed cautiously. It is possible to lose both your home and your business if you fail to make your payments.
5. Credit Card - In today’s market many credit card companies are offering 0% financing. If you know you can pay back the money relatively quickly, this is free way to borrow. This method should be used cautiously. Interest rates can go up.
6. SBA loan (US only)/Commercial loan - The SBA doesn’t actually loan money but they will guarantee your commercial loan for the bank. To apply for this type of loan the bank will want to see a business plan along with some financial information about you.
7. Grants - NIH (in US) gives grants for Small Business Innovation Research (SBIR) and there are also grants called Small Business Technology Transfer (STTR). To learn more about this go to: grants1.nih.gov There may be other grants in your specific industry. One place to do research on grants is through the appropriate industry association connected to your business.
8. Micro loans - These are loans from nonprofits or government agencies that focus on economically deprived communities and minority groups. These are usually loans for small amounts of capital for example under $25K. Organizations like Working Capital and Small Business Development Corporations in various communities offer these kinds of loans.
9. Angel investors - These are investors who provide money to start up business. They take a greater risk than a bank and will want to make more money because of that.
10. Venture Capitalist - These are groups that have funds available who are willing to take a big risk (often on new technology) and expect a high return. This is usually a source for an existing business rather than a new one. VCs invest large amounts of money in the business and therefore own a large part of the business. Their goal is to sell the business in a relatively short time. One way they sell the business is by taking the company public through an IPO (Initial Public Offering).
To learn more about this author, visit Alvah Parker's Website.
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Q: How can we get our company funded
