Wednesday, March 20, 2013

Six Sources of Startup Business Financing

Tips to Help you Find Startup Financing for your Small Business

Start-up businesses often have a difficult time finding sources of start-up business financing for their initial financing needs. It is often not possible to get bank loans because banks aren't interested in unproven businesses. Even with the best possible business plan, in the world of business and finance, you may not be able to convince a bank to loan any of their often-scarce money available for credit for start-up financing to a brand new business.

There is money available for those who are starting a business. You just have to know where to look and think strategically and creatively. Here are the six most likely sources of start-up financing for your new business. It is usually a good idea to try to use a combination of two, or even three, or these sources to get the start-up financing that you need for your new business.


As hard as it sounds, bootstrapping your start-up business really may be the best way to go. If you find a way to finance your business yourself, you don't have to answer to any investors and you have total control of your business. Bootstrapping requires serious strategic thinking and planning.

Raising funds yourself may involve pledging your own assets. Since the largest asset most people have is their home, you may find yourself in the position of taking out a home equity loan on your home. You only want to do this if you have an iron-clad business plan as pledging your home is not something that should be done casually.

Since the recession, banks are not making as many home equity loans and they are usually making them for only about 80% of your home's value, if that. You have to have a spotless personal and business credit record to qualify.

Financing with the Help of Family and Friends

The good thing about financing your startup business with the help of family and friends is that you can often get fairly lenient repayment terms. That may be important in the initial years of your new business. They may give you a low interest rate and a long time to repay them. On the other hand, they might want a stake in your firm if you are agreeable.

One problem is that in hard economic times, family and friends may not have access to the capital they could normally access.

Small Business Administration 7(a) Loans