by Deanna
Mascle
http://answersaboutworkingathome.com
©
2007
You have to spend a buck to make a buck, and starting
a company proves that rule. Often, people looking to open a business need to invest
in some start-up equipment or consumables and those items can be costly. The long
term shows promise, but having a solid foundation to open your business is important.
So just what are the options for finding enough funds to get your company off
the ground?
Your first and easiest source of start-up funding
may logically be your friends and family. They know you, your dreams, goals and
ideas, and they know how motivated you are to carry out the plans that you've
surely told them about already. However, entering into a business relationship
with friends and family isn't always a good idea. These people won't be able to
be objective about their contribution and may only be providing you money based
on personal feelings. Money and emotions should never mix. In addition, finding
other sources of investors that are experts in the field may prove to be more
useful, as these individuals can provide you with advice and counsel for your
business.
Before accepting money, be sure to have a
frank discussion on what will happen if the business fails. Be sure that you have
a backup plan for repaying loans. Friends often say, "Don't worry about it;
pay me back when you can." In reality, if your company fails, your friendships
could be damaged by your inability to pay. Finally, if you do accept loans or
donations from friends and relatives, be sure to document them as if they were
from strangers. Should you later decide to seek venture capital or bank loans,
those officials will want to see a paper trail.
Private
investors are another option. Venture capital operations tend to deal with more
established companies, but "angels" are often willing to take a chance
on a brand new startup. However, an angel is not a smiling benefactor waiting
to rain down money as a gift. Angels are shrewd investors who expect a solid return
on their investment. A well-crafted business plan and excellent negotiating skills
are absolutely required to secure funding from an angel.
Bank
loans are another possibility. However, banks absolutely demand a solid paperwork
trail. They are generally reluctant to invest in brand new businesses unless they
are backed by impeccable personal credit. Even then, you must be prepared to demonstrate
hard numbers as opposed to projections. Signed contracts from customers, a lot
of collateral, and a willingness to forgo your own salary can all help to convince
a bank.
Do not overlook creative means of financing your
new venture. In many cases, you can start operations on a shoestring, and gradually
build your company by re-investing your profits. This works best for companies
that require little or no inventory and are, at least initially, run from a home
office rather than a storefront. You may be able to tap into your retirement fund
for startup capital. Credit cards are an option, but should be used sparingly.
Talk with the Small Business Administration about their financing programs. Matthew
Lesko's "Free Money" books offer a compilation of funding sources ranging
from the common to the obscure. With a 90 day money back guarantee, the books
are definitely worth a look.
Raising start up capital can
be difficult. However, by looking creatively at the problem, writing a sound business
plan, and considering every available source of funding, it is possible to find
the money for almost any new business venture. Patience and a sense of humor are
invaluable.
