Getting Startup Financing During a Crunch
Anyone starting up a business right now might very well be biting their knuckles and wishing they had been at the right point to start a business either years ago or a few years in the future. Now is an iffy period for many financially, and everywhere you look there signs of corporations, organizations, and individuals tightening their belts. Trying to get loan is difficult, even for a business that has been operating successfully for several years. It is natural for a new business owner to feel like an upstart for asking for startup financing at this time.
Startup Cash Search – There are places to look for startup cash. However, the new business owner needs to be able to find these often overlooked places.
Startup Financing: Going for the Bank
Do not give up on banks without even trying. For many startups, the traditional bank loan might be a long shot, but it is worth trying anyway. The bank is going to want proof the startup actually started at least two years ago and has been doing good business. The bank will also want something tangible for collateral. One good strategy might be to apply for a loan guaranteed by the Small Business Administration. The bank will be more inclined to favor a business with this guarantee, but be prepared to put up the family home as collateral to get that first loan.
Startup Financing: Going for the Grant
Grants can be a complication, but a worthwhile one. There is, for example, the Small Business Innovation Research (SBIR) grant. This is a federally funded program that helps fund startup for high-tech companies, but there are other grants available. The number is limited and the list of applicants is long, but it is worth a try, especially if the startup is a going to be wholly or partially owned by a woman or a minority.
Startup Financing: Shaking the Family Tree
Yes, the old saying that borrowing from friends and family is a bad idea is usually true, but if the investor is very sure of the business’s future there can be an exception. Often this sort of financing is informal, but drawing up some sort of contract is still a good idea before letting loved ones and long-held friends in on the ground floor of the business.
Startup Financing: Getting the Money from the Owner Himself
On average the new business will need about $70,000 to start, and some new business owners have put all they have including house, car, and recreation vehicle on the line for their new enterprise. They empty out the personal savings, go for the home equity loan, and when all else looks bleak, they break out the plastic to keep their new business afloat. The last possibility is the riskiest because if the business fails, the owner is left with almost no way to start over.