How to Finance a New Business

New Businesses are fun but cash can be hard to come by

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You have an idea for a new business. Now comes the tough part, the financial aspect. Here are some helpful tips and resources to get you started and off in the right direction. Remember, you are funding your goals, new lifestyle and ideas. You will need patience and alternative plans. If you are persistent, you are more than likely to succeed in your new business.

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Instructions

Difficulty: Moderate

Things You’ll Need:

Money
Resources
Business Plan

Step1

Starting up a business is fun, financing may not be. When you finance a new business, look in all the obvious places for money, first. This is called venture capital in the business world. These sources can include relatives, inheritances, unpaid loans from others, savings accounts or retirement accounts. Note with retirement accounts you may not be able to withdraw the money for just any reason or without penalties if you are not the correct age.

Step2

Business plans can take many shapes and are all unique. After you have exhausted the first step, lay everything out on paper, in other words, start your business plan. Plan out how much money you have from the above resources, then develop a one to five year plan stating how much more financing your business needs and how much you think you will bring in during that time. Do not forget to include who your customers will be, projected sales, what your market will be and where you will be located. List your operating expenses, budget, utilities, buildings, labor, materials, vehicles, supplies and inventory you will need. You can always tweak this later on, right now this is just a rough idea. You can do this on paper or you can purchase software to assist you with this task. There is a link within this article for more information.

Step3

Small Business Administration is here to help You can look to the government for assistance. Some money may be in the form of grants, while others are loans that need to be paid back and must meet certain requirements. A link to find out more about these resources is found within the article. There are also additional resources, such as SCORE that have been where you are now and can show you tips and ideas on financial aspects you need to know for a business. That link is also found here in this article.

Step4

Business partners can help ensure success, choose wisely! This is riskier, but you could take on a partner or some investors. Keep in mind, responsibility is divided among you. This includes personal and financial liabilities, so choose well. Find some investors or a partner that has had a previous successful business partnership and has a proven track record. You can show him your plan for a new business and then give him a clear idea of what you wish to accomplish and how much financial help you need to get there.

Step5

In the case you do not wish to complete some of the previous steps, but you still have a business plan in place, take it to your local financial institution. This is preferably a bank where you have a prior relationship that includes some past loans, accounts or investments. It is good practice to develop a banking relationship so business financing is available when you need it. Try not to borrow the entire amount at once.

Step6

If you would not like to take on debt, partners or involve other individuals in financing a new business, consider raising cash as you need it. Keep your overhead very low. Start with a home office or low rent store. Use your regular vehicle instead of purchasing a new one. Keep minimal inventory and staff with only family, friends or yourself. Do advertising for your business by word of mouth, inexpensive business cards or fliers. Do not take out expensive radio, TV, or yellow pages advertising. As you bring in money, use it to pay expenses, build capital or advertise. Do not spend any unnecessary money if you have not earned it that month. Do not draw a salary until you can afford it.