How to Get Startup Capital

Unfortunately there is no easy way to get startup capital for a new business. For most new businesses, startup capital comes from personal savings, loans from family members, credit cards or bank loans that use a personal asset, such as a house, as collateral. Entrepreneurs with solid business backgrounds or fame can sometimes find investors for business ventures, but this is not often the case. For most of us, financing a new business takes risks, hard work and sacrifice but the rewards of working for yourself can make it all worthwhile.

Difficulty:

Moderately Challenging

Instructions

Things You'll Need

• Business plan

1. Save money and build your financial portfolio before starting a business. Even if you are able to find funding to buy inventory and fixtures to start your business, you most likely will need to support yourself out of your savings until your business gets off the ground. The more financial resources you have, the better you will be able to weather this startup period.

2. Speak to the small business representative at your bank about the institution's lending policies for startup businesses. Learn about available options and interest rates, including business credit cards; business lines of credit and secured Small Business Administration loans. Ask what documents you will need in order to apply for each of these options and what your particular bank would like to see in a business plan.

3. Write a detailed business plan with a section outlining your mission, and another describing your background and experience, as well as the background and experience of any other major stakeholders. Include a marketing plan describing your product or service and its uniqueness, or the ways you will position it relative to other, similar options. Prepare financial statements to back up the information in your business plan, including a balance sheet demonstrating your personal worth, and a cash flow projection with your calculations regarding what it will cost to run your business for the first few years and how much capital you expect it to bring in during that time.

4. Present your business plan to your bank's small business loan officer and schedule an appointment to speak to her. Also give a copy of your business plan to any potential investors, including family members. Express your willingness to answer questions and consider suggestions.

References

• The 6 Biggest Mistakes in Raising Startup Capital
• 20 Tips for Finding Money Now
• National Association of Small Business Investment Companies