Every start up has one critical need in common - financing. Usually the first thing everybody thinks about is going to their bank and applying for a small business loan or SBA loan. This is a great way to get cheap financing but the requirements can be quite steep and not everybody can meet it. First of all you'll be asked to have anywhere from 20% to 40% of cash to put down, then you'll need to put up everything you own as collateral and eventually you and your spouse (if you have one) we'll have to provide unlimited and unconditional personal guarantees.
The great news is that there are other funding sources available besides small business and SBA loans. You just have to look for them and sometimes you might need some creativity.
- One of the most commonly used and proven methods of start up funding is raising money from your family or closest friends. Typically this type of financing can come at great terms and with lots of flexibility. The negative side is that if your venture goes belly up you'll have enemies for life.
- Angel investors are another great source of funding. Do not confuse angel investors with venture capitalists. Venture capitalists are only interested in companies that have been in business for at least 2 to 5 years and have proven track record. Angel investors on the other hand will fund a ground up start up. Visit www.angelcapitalassociation.org Angeg Capital Association to find your local group of angel investors. This website provides information about accredited angel investors in every state. If you are getting money from angel investor it is very important that he or she is accredited investors otherwise you can jeopardize your next funding rounds.
- If your start up is art related or you are creating something crazy or outside the box type of businesswww.kickstarter.com can be a perfect funding option. The best thing about this option is that Kisckstarter's funding works on a donation principal so there is no loan or investment to repay. But again to qualify for this one your business idea needs to be nontraditional.
- Shoe string budget or self funding can be another option. At the end of the day if you can't find money for your start up business maybe it's because you need to be a little bit more flexible on your business plans or completely rethink your idea and go with something else. Over the years I had many different ideas for my start up business but eventually they all crashed into funding shortage wall. So I created a website that cost me only few hundred dollars to pay for the server. Ultimately this idea can be as lucrative as any other ideas but with minimum investment.
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