Small Business Start Up Financing

The number one question I asked you as a small business start-up coach is: Where can I find start-up cash?

I'm always happy when my clients ask me this question. If you are asking this question, is a sure sign that they are seriously financially responsible for starting it.

All Money Is Not the Same

There are two types of start-up financing: debt and equity. Consider which type is right for you.

Debt financing is the use of borrowed money to finance a business. The money you borrow is considered the debt financing.

Sources of financing loans debt are many and varied: banks, savings and loans, credit unions, finance companies and commercial, the U.S. Small Business Administration (SBA) are the most common. Loans from family and friends are considered debt financing, even when there is no interest attached.

Loans for debt financing are relatively small and short-term and are awarded based on the guarantee of repayment from your personal assets and equity. Debt financing is often the financial strategy of choice for start-up companies.

Equity financing is any form of financing that is based on the assets of your business. In this type of financing, the financial institution offers money in exchange for a share of the profits of your business. This essentially means that you will sell a part of your company in order to receive funding.

Firms venture capitalists, business angels and other work-based businesses are the standard sources of capital for equity financing. Managed properly, loans from friends and family can be considered a source of financing non-professional equity.

Equity financing involves stock options, and is usually larger, long-term investments of debt financing. For this reason, equity financing is more often seen in the growth stage companies.

7 key sources of financing for small business start-ups

1. You

Investors are more willing to invest in your start-up, when they see you put your money on the line. So the first place to look for money when starting a business is their own pockets.

Personal property

According to the SBA, 57% of entrepreneurs immerse themselves in a personal or family savings to pay for the launch of their company. If you decide to use their own money, do not use everything. This will protect you from eating Ramen noodles for the rest of your life, give you a great experience in borrowing money, and build your business credit.

A Job

There is no reason why you can not get an outside job to fund your start-up. In fact, many people do. This will ensure that there will never be a time when it has no money in and help take the most stress and are likely to start.

Credit Cards

If you plan to use plastic, shop around for the lowest interest rate available.

2. Friends and Family

The money from friends and family is the most common source of non-professional loans for small business start-ups. Here, the biggest advantage is the same as the biggest drawback: You know these people. Unexpressed needs and attachments to the result can cause stress to justify steering away from this type of financing.

3. Angel investors

An angel investor is a person who invests in a business venture, providing capital for start-up or expansion. Angels are wealthy individuals, often entrepreneurs who are high risk investments with the hope of new companies for the high rates of return on their money. They are often the first investors in a company, adding value through their contacts and expertise. Unlike venture capitalists, angels typically do not pool money in a fund managed professional. Rather, angel investors often organize themselves into networks of business angels or angel groups to share research and pool investment capital.

4. Business Partner

There are two types of partners to consider for your business: quiet and work. A silent partner is a person who contributes a portion of the capital of the business, but is generally not involved in the management of the business. A business partner is a person who contributes capital not only for part of the business, but also skills and labor in day to day operations.

5. Trade receivables

If you are starting a new business, chances are good that there will be a commercial bank loan somewhere in your future. However, most commercial loans go to small businesses that are already showing a track record of profits. The banks finance 12% of all small business start-ups, according to a recent SBA study. The banks consider people with a solid history of financial credit, guarantees and related business experience (buildings and equipment). Banks require a formal business plan. They also take into consideration if you are investing your money in your start-up before giving a loan.

6. Seed financing companies

Seed financing firms, also called incubators are designed to foster entrepreneurship and nurture business ideas or new technologies to help them become attractive to venture capitalists. An incubator typically provides physical space and some or all of these services: meeting areas, offices, equipment, secretarial services, accounting services, research libraries, legal services, and technical services. Incubators involve a mix of advice, assistance and support to help new businesses develop and grow.

7. Venture Capital Funds

Venture capital is a type of private equity funds often provided new business growth in professional, institutionally backed outside investors. Companies venture capitalists are real companies. However, they invest the money of others and much larger quantities of it (several million U.S. dollars) compared to seed funding. This type of involvement is usually more suitable for rapidly growing companies that require a lot of capital or start-up companies with a strong business plan .......