Tweet

Small Business Start Up Capital

Written by: Carrie Langstroth

Article Overview: You can source start up capital for small business through banks, government agencies, friends and family and loans against home or insurance policy.

Small Business Start Up Capital

Starting an Internet or home-based business may not require a lot of capital, as you do not need to find office space and hire several employees. However, you need basic infrastructure for your business. You would also need to:

• Market your business
• Build a client base
• Pay bills for operational expenses

To tide over these regular expenses, you may need much more capital than what you have in your account.

In such cases, there are several sources that can fund new small companies. However, seeking and securing cash requires:

• In-depth and cautious research
• Excellent negotiation skills
• Persistent commitment to your new business

Sources of Start Up Capital for Small Business

Sourcing start up capital for small business is among the most daunting tasks for new entrepreneurs. Most entrepreneurs find money through banks, private investors, suppliers, customers or professional angel investors. The source is dependent on the manner in which you want to raise the funds and pay it back.

Banks: They are a direct source of funds. Several banks offer loans to small businesses that are already operational. However, you will need a business plan and a personal guarantee to convince the bank of your venture. Since the funds are given as a loan, you must generate substantial cash to payback these loans. You can find banks through the yellow pages or via the Internet.

Government: The government also assists in the survival of small businesses by providing them with various grants through the Small Business Administration (SBA). However, these grants are highly competitive and have strict rules about money usage. Moreover, there is no guarantee that you will receive a grant, so you need to keep other options open. Government agencies can also help you with the legal and administrative aspects of starting the business.

Friends and family: The most common source of funds for entrepreneurs is a group of friends and family. However, you must treat these investors as business relationships and reveal the use of money. You should also show the manner in which you intend to repay the funds. You may decide to pay interest or make them your partner in business.

Loan: You can borrow against your 401(K) plan. Alternatively, you can get a loan against your home. However, you might lose your home if the business fails. Use this option only if you are assured of the success of your business.

Insurance policy loan: You can receive up to 90% of the cash value. Your policy remains in place as long as you pay your premiums on time.

Strategic investors: Suppliers and customers may also decide to back your business. If your product or service complements that of your supplier, they might invest. However, accepting funding from a supplier might prevent you from using the supplier's competitors.

Private angel investors: These investors are similar to professional venture capitalist firms. You need to convince them of the viability of your business plan. These angel investors expect a return in the form of IPO, acquisition or stock buyback over the period of three to seven years.

Related Articles
  Is Capitalism, as Seen by Enterpreneuers now, Good or Bad?
  Working Capital Financing
  How Do African Businesses Get Start Up Capital?
  Small Businesses That Require Limited Capital
  Getting Started In Real Estate Investing

Article Tags: business start up capital, small business, start up capital
Referred by: http://jaykubassek.com



Related Forum Posts
New Small Business Topic - Hello everyone, I'm on the lookout for new topics to add to my site. We just launched a Franchising section and are planning Human Resources section. Do you have any thoughts for a new section? Here's a list of what we currently have: Angel Investors Branding Bank Loans Business Coaching Business Plan Franchises (New) Insurance Legal Marketing Public Relations Sales Small Biz Loans Venture Capital
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Del Castienne - International Business and Project Brokers - In addition to the above, Del Castienne is an international brokerage firm specializing in various entrepreneural services. Del Castienne is more than just a brokerage, as we facilitate Private International Venture Capital for Business and Projects from Commodity Speculation Transactions, MBO, MBI, M&A, Bridging Finance, Patents, Branding, JV, Corporate Advisory Services, Business Plan Development, etc.. Del Castienne is linked to 1200 private international Venture Capital consortiums and Funding Syndicates with a funding capacity of $ 115 billion and 5000 international Investment Bankers and Business & Project Brokers. This in itself should provide you with a gateway to the best source of funding in the world. Through Del Castienne any entrepreneur can have up to a potential success rate of 25% (conditions apply) with absolutely no up front costs. Del Castienne charges a maximum of 5% commission which is far below the international standard of 10% - 12% on project value. If you are tired of running back and forth with countless dissappointments, please give us an opportunity to assist you. Our minimum Venture Capital amount is $1 million and we a Commitment Letter can be provided with in 30 days after formalities are in place and your information was received.
These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Effective Leadership

How to Set Sales Goals that Work

ROSI Return on SUNK Investment

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.