Small Business Financing

March 12, 2013 | By More


Business Financing and how to approach it!

Once you have the idea for your own business, do not be discouraged by the thought of not having the money, or the knowledge, or time, or any other excuse you might find. If you want to become an entrepreneur, you must make yourself believe that things will come together as you go along. The most important point is that you have a dream and that you put this dream in writing. Planning and unwavering faith will drive you forward and attract the right situations and people into your life.

Small Business Financing

Oftentimes Business Financing is one of the greatest obstacles for many, we just do not know where to get it or who we could ask except for friends and family members. While I know it is much easier to ask someone who is already in a trusting relationship with you, make sure you have a solid written idea for your business as well as a plan to repay the debt. People want to see your vision, you need to enlighten them, put them on fire and share your passion for it, they need to see you are for real and committed to succeed. Another significant factor is to be open and honest about the possibility that the money is at risk and that there is no guarantee that the money is returned. Even though you do not plan on failing, sometimes a plan does take much longer than anticipated and you cannot pay back as you promised.

These general information are a good guide if you need to ask for money, be honest and be prepared that you get rejected many times. Following a few ideas on where to ask or how to obtain funding.

 

  1. Enter into a Partnership

If you do not have enough money to get started, but a lot of technical knowledge about your idea, look for people which seek opportunities, place an add online or in the business section of your local news letter that you are looking for a partners with monetary investment and also workload related involvement. This is actually a smart way to go, preferably that person should have different talents than yours, so responsibilities can be delegated and shared. While this is an easy way to obtain funding, partnership needs to be carefully evaluated, you want to make sure that you are not going into business with someone taking advantage of you or not working as hard as you. A well written shareholder agreement is a good way to put things in writing beforehand so you won’t have any regrets later on.

 

  1. Ask the bank for a personal loan

    If your credibility is good, simply ask your bank for a personal loan, this is a preferred method if the amount of money you need is not a large number, if you need a little more you might need a co-signor.

 

  1. Use your credit cards

    Because this is a high interest loan, I only recommend this as bridge financing for short term. I personally have used that method before, but make sure you have a way in front of you that you can repay the balances quickly.

 

  1. Small Business Administration, SBA

    In the USA the Government wants small businesses to succeed and wants to see small businesses getting started. The SBA is an organization which works with certain local banks and guarantees loans given to businesses up to a percentage. That way the Banks are more liberal with giving these loans, as they are protected by the government. Multiple programs are available for startups and expansions, in some cases you can apply for a grant, grant money does not have to be paid back. Click here for more information.

 

  1. Apply for a Grant

There are many programs out there for specific niches, specifically if your business serves the local community or has an educational foundation. The government spends money in various fields and grant money is free or has a very low interest rate. Search for grants locally and on a federal level, there are non-profit organizations which help you to find grants for your specific niche.

 

  1. Angel Investors

    With Angel Investors, the bigger the idea the better. These people are professionals, looking to place large amounts of money for large and quick returns. They are likely charging an amount which might exceed 5 or 6 times their investments and they are always getting paid first. They make sure they have partnership position in your company and basically have say in how the money is spent. Even though that does not sound attractive to many, if your idea is large, a product or service which can be sold on a global level, it might not be too bad of an idea to have a financially strong partner who can connect you with the right strategic partners and the load of money you require to push your idea into the market quickly. Think about it, they want to make sure that they make a return on their investment, they are not doing it for free, but they have the knowledge on how to get quick returns and once they agree to finance you they will do whatever it takes to push your company to success.

 

  1. Hedge Funds

    Similar to Angel Investors, Hedge Funds charge you a significant amount of interest on their loans. For a Real Estate related company or developer, this is a good way of financing for a short term period of about 6 month to 3 Years, depending on your project. There are many out there, they are easy to find. If they like your idea the money can be funded quickly. They are less likely involved in the direct operation of your business, but will keep the collateral if the loan is for Real Estate and you fail to repay.

 

  1. Do it yourself

    If none of the ideas are working for you, do not be discouraged, remember there are plenty of examples out there where the business owners started their companies in the garage without any money. Remember the idea and your passion for it is what mainly drives you to success, if you do not have either, any money in the world will not buy you success. Passion and love for what you do are the most powerful weapons you have. Take Bill Gates, Michael Dell, Mark Zuckerberg and plenty more, they all started with little or no money, but with unwavering faith, passion and believe that they would succeed, no matter the obstacles, no matter the problems and difficulties they had to overcome. If you want it bad enough, you find a way!

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Category: Finance related, Starting and building a business

carsten@officentos.com'

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