Two Weeks to Startup: Day 5: Find Financing
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Once you've decided on the type of venture you want to start, the next step on the road to business success is figuring out where the money will come from to fund it. Here's a quick look at where you can begin.
Most entrepreneurs self-finance their businesses through personal savings, credit cards, second mortgages, or loans from friends and family. You may also be able to match your qualifications with a microloan: Private and SBA-backed agencies make loans from a few hundred dollars to $25,000. You can find a local microlender through the SBA's Web site. You might also investigate crowdfunding, a way of networking with people online willing to invest usually small amounts of money to back a venture they believe in.
You may also qualify for a niche or specialty loan. For example, the lending and learning organization called Count Me In makes loans to women entrepreneurs in small amounts up to $50,000. Some large banks also offer special loan programs for women, minorities and small-businesses.
Although there's no such thing as "free money" for small businesses, there are some cash awards, prize money and minigrants offered by a dwindling pool of organizations.
You can also seek venture or angel funding. Both angels and venture capitalists are looking for great ideas that can translate into highly profitable businesses. If they're interested in backing your idea, they may want a large equity stake (25 to 40 percent or more), so this process can take significant time to arrange and a formal written business plan will be required for consideration. They can be located through online directories, or better yet, referrals from personal contacts you make among the leading business owners, trade group members, industry associations or chamber of commerce activities in your local business community.
Whatever your funding source, remember to incur any debt in moderation. You'll make better business decisions when you're not under the pressure of heavy debt.
Check out Entrepreneur.com's Raising Money How-To Guide.
Find angel investor groups in the Angel Capital Association Member Directory.
Find venture capital investors in the National Venture Capital Assocation Member Directory.