One key to a successful start-up is obtaining adequate financing. Raising capital is the most basic function of all business activities. Youíll soon discover, however, this is not as easy as it looks. In fact, you may become quite frustrated before itís over. However, if you have planned effectively, raising money for your business will not be a totally unpleasant experience.
When looking for financing, there are several options you may consider:
Personal Savings: This is the primary source of capital for most new businesses; anything from your savings account to refinancing your home. CAUTION: While using your credit cards for start-up expenses may seem the easiest route, this can really get you into trouble down the road. There may be better options available to you.
Angel Investors: These include friends, family, co-workers and other private sources. Very often the money is loaned interest-free or at a low interest rate; a big plus when youíre just starting out!
Banks & Credit Unions: The most common source of outside funding, banks and credit unions will provide a loan if you can show that your business proposal is sound (this is why you need a business plan!). This doesnít necessarily have to be a personal loan - the U.S. Small Business Administration offers a guaranteed loan program, along with other loan providers located at the BAC.
Venture Capital Firms: These firms help expanding companies grow in exchange for equity or partial ownership.