How to Obtain Funding for a Start-Up Business
Starting a business brings a lot of challenges. Among them are finding the right business idea for you, determining a profitable location and finding employees you can rely on. One of the challenges of starting a business is how to obtain funding. Without start-up funding, it is unlikely that you will be able to get your business off the ground. Develop a plan to help you secure the funding you need and get your small business going.
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Instructions
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Write a business plan that can be used as a tool to interest investors and lending institutions in your business. According to the Small Business Administration, a business plan should include information about your company, the product or service you intend to sell, your initial staffing needs, your sales and marketing strategy, your revenue projections for the first three years of your business and a detailed worksheet on the start-up funds you need and how they will be spent.
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Work with an accountant, lawyer and bank advisor to help refine your business plan until it presents the information potential investors will need to see.
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Determine how much of your start-up financing you can provide yourself. Some of the resources you can use to get financing include cutting back on your spending to save money, personal loans, home equity loans and a second mortgage. If you are currently working a job, then see if there are options for more income including overtime or weekend work.
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Present your business to investors like venture capitalists and friends and family members. Use your business plan as the presentation tool, and have an investment agreement available for all interested parties to sign. Do not accept an investment without first working out the details of an investment agreement. This will help you and the investor to understand what kind of return is expected on the investment. According to investment banking firm George K Baum & Company, some of the standard terms of an investment agreement include the amount of the investment, the interest rate and the length of the contract.
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Determine how much additional start-up financing you need and then reach out to banks and other lending institutions for the remaining balance. Small businesses can talk to banks that administer the Small Business Administration loan program. These are loans backed by the federal government but administered through a bank.
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Tips & Warnings
Use banks and lending institutions as sources of start-up capital last. With investors you may be able to sell part of your business in return for an investment. A bank or lending institution will charge interest on your financing that can make the start-up costs more expensive.
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