One of the hardest parts of opening a small business is getting your hands on enough capital to for the business creation. There are numerous sources available and each has its own pros and cons when it comes to funding a small business. The first step in funding a small business is to know how much you will need to get the small business up and running and how much backup capital you need to see you through the startup growing pains.
Small Business Administration Can Assist with Small Business Startup:
The best place to begin is with a business plan. Here you can set up a budget and get a good grasp on exactly how much startup capital you will need. The business plan will also allow you to focus on exactly what your small business will do and how it will make a profit. This is information that any investor or bank will want before they will even consider lending you startup capital. The Small Business Administration (SBA) is a great resource for a small business. They can help with developing the business plan and know of current resources and opportunities that may be available to you. They can also help you navigate the issues of setting up the business including where to apply for an EIN or which licenses will be required by your state.
Personal Savings and Resources Can Assist with Small Business Startup:
When at all possible, look to self-funding for your small business startup. You may have a line of equity in your home, personal savings, credit cards, or other personal resources available. Credit cards are not the best of these options as the interest is high, but the other resources will let you fund a small business. If you can fund the business yourself, you will not have to listen to relatives, banks or other sources wanting their investment back and you are more in control of your small business’s destiny.
Traditional Banks and Lending Institutions Can Assist with Small Business Startup:
Apply for a loan from a bank or credit union. You will need to have your business plan in place and if you have collateral, a lending institution will be more likely to take you seriously. One type of collateral your bank may consider is a purchase order. If you have secured a purchase order from a large company, the bank may be more willing to lend your small business startup company the funds you need to get off the ground.
Angle Financing or Venture Capital Can Assist with Small Business Startup:
There are many people out in the world who are willing to assist a small business with their startup capital. One of the best ways to find these investors is to use the Small Business Investment Company (SBIC) resources from the SBA. Here, investors are regulated so that potential startup businesses are not at the mercy of someone who may be unscrupulous about loaning startup capital.
Employee Stock Options Can Assist with Small Business Startup:
Another resource for finding startup capital for a small business is employee stock options. If you form a corporation, you can issue stock certificates to both employees and private investors, such as family members, to raise the capital you need to finance your small business. You will have to answer to your stockholders on your small business’s success, or failure, but this is a good way to finance a large source of startup capital without going to a lending institution.
Starting a small business is a scary venture in any economy. The United States was built on the backs of its taxpayers which includes a large number of small businesses. To be successful, small businesses need to be able to get the necessary capital to survive during rough times so that they can pay it back when the economy improves. By looking at all of the potential sources for raising capital for your small business, you can select the best source for your small business startup.