Information on Raising Funds for Small Businesses

Obtaining the necessary funds to kick-start your small business start-up can be quite a challenging task. But before you get dejected, lets first take a look at what the numbers have to say. The average small business start-up cost to become an affiliate marketer for instance, is somewhere around $250, which is a small investment when comparing it with a $30,000 cash deposit, that is required to start a franchise.

But when you take into consideration all the other additional monthly expenses like rent, advertising, payroll and inventory, then you know that starting a small business is no ‘small’ deal. So, coming up with the necessary cash to fund your business can be very difficult when you have a car loan to pay, a mortgage to take care of, and a family to support.

Going the traditional way and opting for a loan from your bank won’t really get you very far, especially when you consider the fact that they don’t like lending out money to start-up businesses that have no assets or history. But, again do not let this dampen your spirit. It is time to take a look at all your personal assets. You never know, you might actually already have the required ‘wealth’ to get your small business started.

Sources for Funds

Here are some sources:

Life Insurance Policy
401(k) Plan
Friends and Family
Credit cards

These are all potential sources that can be tapped into. In doing so, you will raise money out of your own resources. It will give you full control over your money. And this control is the very thing you wanted in the first place right? That’s why you chose to become an entrepreneur!

If you do have a life insurance policy, then you can put it to work. Though it sounds weird, think about it – a life insurance policy will provide money to your family and spouse in the vent of your death. What most people don’t know is that you can actually borrow against the cash value of the life insurance policy, and then pay it back at flexible rates, on your own terms.

Next, you have the 401(k) Plan from your previous employer – all those monthly statements that you filed away so diligently but never cared to even look at. Though the whole concept of borrowing money from friends and family to start your business may sound like a simple one because you already have an inbuilt level of comfort and trust with them, but you need to understand that there are many risks involved as well. If things go smoothly, then you’ll probably be the Donald Trump or the entrepreneurial king of your family or your friend circle. But, if your business goes down the drain, then it will put stress on the relations you had with those closest to you. So, is this risk worth taking?

Now, take a long hard look at your credit card. The one that you used to buy that dinner, your computer, and those new shoes – yes this credit card can help you get your business off the ground. If none of these resources work for you, then you can always take the traditional route and opt for bank loans.

Business Loans Available

Long-term loans are probably the most common types of loans available. These loans can be used as a working capital funding source and you can repay them on a monthly basis over a term agreed with your bank or financial institution.
Short-term loans on the other hand are supposed to be repaid within a year in a lump sum, instead of monthly.
Credit lines are usually used for working capital funding. Instead of granting you the entire loan amount, the financial institution will give you a certain amount each year.

Some Other Sources

When looking around for small business funding resources, your bank should be your first stop, especially if you have a history of working together before. Familiarity does go a long way in clearing any insecurities and doubts. There are many other types of lenders as well, the only differentiating factor between each of them would be the kind of loan they grant – secured or unsecured. Banks grant unsecured loans, while financial institutions are in favor of secured ones.

Ideas For Creative Business Financing

Whether you are already a business owner, or are starting up new, the first thing that you will think about is finance. There are many ways of going about getting the money you need.

That said, you must also take into consideration several factors before you get the money. Have a look at the various options you have in front of you, and compare it with your business plan and projected revenues. Realistically speaking, identify how you would be able to repay the money that you are borrowing.

Here are some ideas that will help you get the money you want.

Savings Account: Here we are talking about your own savings account. Before you dip into your kitty of savings, consider the following: How much savings have you got in that account? Are you dependent on that money for your day-to-day expenses? How confident are you that your business venture will succeed? Be realistic while you make these considerations. If the savings account is not something you depend upon, and you can afford to forget about the money you take from it should you incur a loss, then go ahead and take the money from it. The upside to this is that you are taking an interest free loan from yourself and saving quite a bit of money on that end. You can even repay this loan in variable installments, and not suffer penalties for it.

Family and Friends: This is also a good option for you to acquire funds for your business venture. Depending upon what you discuss with your friends and family members, you can choose the method of repayment, and also if you are liable to pay interest. The downside to this is that if you cannot repay the money back in the time that you promised, you stand to lose a good relative or friend.

Partners: Another way of generating funding is to take on partners in your business. This is again a matter of choice, and your partner must have the money and the inclination to invest.

Loans: This may not be a very creative idea, but some banks offer very interesting kinds of personal and business loans. It is worth a shot to go have a look at these options. You may just strike a gold mine, and find the perfect method of financing your new venture.

Sell the Junk: If you have any unused premises, or unused inventory lying around, or unused trademarks and licensing rights, it is a good idea to sell them to those who need them. This is a good method of recycling your own assets to create finance for your enterprise.

Sell Shares: Selling the shares of your company is a time-honored method of creating finances for your company. If you have a new company, you can do it. You can also do it, if you own a well-set company. You can also sell the shares to your employees. Talk to your CPA and get more details.

Advertise: This sounds silly, but sometimes an advertisement can also generate interested financers for your project. Putting word out there ensures that you generate interest from persons looking for a good investment opportunity. It also gives you a chance to advertise about your company along with it.