All those relatives you approached told you they would love to give you money for your new business but just don’t have it right now. It’s the same story over and over again, but they have expenses of their own to cover and investing in a new business is just too risky. Your new idea is a sure winner, but you have to convince everyone else of that fact.
Entrepreneurs are notorious for having great ideas, a willingness to work and lots of enthusiasm. But what many of them really need is start up business funding that matches the enthusiasm in order to get the business rolling. Finding startup funding can be difficult and especially for someone who is new to entrepreneurship. It seems as if you are expected to have a proven track record to get funding, but you need the funding to start proving yourself.
Options Exist for Those Willing to be Persistent
Entrepreneurs often start new businesses with their own money, but it doesn’t take long before those funds are gone. If you were fortunate and family or friends invested in your enterprise, then you may have even been able to start the business. But it will not take long before you run out of funds and need new sources to continue growing the business. Early expenses include buying merchandise inventory, payroll and equipment. It would be a pity to get your business started and have it die an early death due to lack of startup funding.
There are multiple sources of funding available today, and you should apply to all that might be interested in your business. The best step to take is accepting help from a professional who has access to these funding sources. This is especially important given the right credit market. A professional help you identify the most likely funding sources and then assist you with preparing funding applications.
Following are the four major categories of start up business funding.
· Equity Partners – This type of funding relies on investors who fund a new business in exchange for taking a percentage of ownership. The ownership can take the form of a working partner or as a stock holder (if incorporating).
· Angel investors and angel organizations – Angel investors are people who use their private money to invest in new ventures. The investment may take the form of equity or debt. They are called angels because this type of funding seems heaven sent to an entrepreneur having trouble locating start up business funding. But these angels are actually experienced business people who can evaluate a new business idea with expertise. Angels are hoping to earn a higher rate of return by investing in start ups.
· Venture Capital – Money called venture capital is loaned by a firm or an individual. This type of funding is usually sought after for larger new businesses. The goal of the venture capitalist is to find businesses that offer early high returns. The investor will usually take an equity position which means you must share ownership. Even if that idea bothers you, don’t skip this form of financing because the final deal can be structured in hundreds of different ways.
· Business Loans – Money has been tight during the recession, but banks are lending. The news reports have discouraged many budding entrepreneurs from applying and that is a pity. If you apply to banks that have been lending throughout the recession, you improve the chance that at least one of them will approve funding. A professional can help you locate these lending institutions that exist around the world.
Assumptions Not Allowed
As you can tell, there are many types of start up business funding. Entrepreneurs today must aggressively locate new funding sources in a competitive environment. But you should never assume that money is not available just because you are a new business. Among the four types of funding – equity partners, angel investors, venture capital, business loans – one or more is going to be suitable for your new enterprise. And while you are at it, go ahead and ask your cousin Bill if he’s interested. Maybe he’ll say yes.