How to Fund a New Business
Starting a new business involves a lot of careful planning, including the search for financial backing. Here are some insights into several different methods for obtaining funds for a new business.
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Instructions
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Create a detailed plan for your business before you begin to look for funding. Most lenders want to see a list of projected expenses as well as potential income for at least the first 5 years of your business. The more detailed the information is, the easier it will be to obtain funds for a new business.
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Use a business capital search engine to look into the options you have to fund a new business. Business capital search engines (see Resources) require a few important pieces of information to locate the best options for funding your business. You'll need to answer questions such as whether you are buying a franchise or real estate. Once your information is processed, you will receive the results, which will include a list of viable options for funding your business.
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Check into a micro business loan if you are starting a small business. This type of loan is designed for start-ups and offers a small sum of money, generally between $5,000 and $35,000. This type of loan is offered more commonly in 5- or 6-year terms and is usually provided by the Small Business Administration. These are also referred to as SBA loans.
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Seek out business loans that allow you to use the equity in the business property and equipment as collateral for a loan.
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Look into credit card receipt advances through your current lender. These are also referred to as merchant advances or cash advances. With credit card receipt advances, you receive a sum of money in exchange for your promise to repay in the future. Interest charges do accrue with this type of funding.
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Apply for a small business credit card that you can use for your business to purchase supplies and equipment or pay for utilities. This type of business funding might need to be combined with one or more other funding options.
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Tips & Warnings
Check out lenders who specialize in business loans since they might offer better interest rates and terms than mainstream lenders.
Borrow only the amount of money that you need over the first year or so. You can always take out a second source of funding if need be.
