How to Fund a Business Plan

Money

Having a great business idea is a beginning, and writing a business plan for that idea shows that you are ready to make it a reality. The next step is to obtain the funding that is required to start your business. Funding a business plan is the most difficult part of launching a new business. Although it can seem impossible at times, this is a doable task.

Things You'll Need

• Good credit record

Instructions

How to Fund a Business Plan

1. Use personal savings to fund your business idea. While it is not recommended to deplete your savings account for this purpose, it is certainly acceptable for you to use some part of your savings to take care of preliminary tasks. Registering your company with the Secretary of State, starting a company bank account and other initial items associated with starting a business are often paid for from the founder's personal savings account.

2. Take out cash advances on your credit cards or use them for some of your initial spending. Small purchases of fixed assets, such as computers or office furniture, can usually be handled by using your credit card for the purchase. This helps provide you with a proper working environment while also reducing the amount of outside investment that is needed.

3. Seek out personal loans from family and friends. Asking those closest to you for an investment in your business is a common practice among small business owners. If you have a good idea and need investors fast, the best place to turn is to the people who have known you for years, perhaps even your entire life, and to give them an opportunity to help finance your idea.

4. Obtain a personal loan from your bank. Most banks are hesitant to make a first time business loan to a new business, but will make a personal loan to the founder as long as proper credit approval can be gained. Contact a loan officer at your bank to learn about the terms and prerequisite requirements for obtaining a personal loan.

5. Apply for a loan backed by the Small Business Administration. Ask your bank loan officer about how to apply for a SBA loan. The loan is not issued by the SBA directly, but is guaranteed by the administration. This makes it much easier to obtain a business loan from a bank that may otherwise be hesitant to issue a new business loan.

6. Try to gain approval for state grants that will help you fund your business idea. Most states have an economic development council that manages a number of different grants to help develop business and industry within the state. Contact your local Chamber of Commerce to find out what types of business grants are available in your area and what steps must be taken to apply.

Tips & Warnings

• Partnering with venture capitalists and other types of private investors is also an option, but is usually restricted to businesses that require more than $10 million in start-up capital. The downside to working with venture capitalists is that they commonly expect to receive a significant portion of ownership in the venture (sometimes as much as 70 percent) for putting up the initial funding.

References

• Parker Associations: 10 Ways to Fund Your Business

Resources

• SBA Financial Assistance Center