How to Generate Funds for a Business

You may need to purchase inventory or other equipment before the business can open its doors to the public.

For many people, starting a business is an American dream. Today, anyone can start a business with very little start-up capital. However, there are times when a business needs substantial funds to get started. You may need to purchase inventory or other equipment before the business can open its doors to the public. Lack of funds can prevent viable businesses from launching. Fortunately, many sources are available to help generate funds for a business.

Instructions

1. Research government-funded programs for assistance. The government has many grants available at Grants.gov to help fund small businesses. The U.S. Small Business Administration (SBA.gov) is a viable option as well. The SBA does not directly loan money to businesses; however, they do guarantee business loans through your bank or credit union. An SBA loan is less risky because it guarantees the lender that the money will be repaid.

2. Borrow the money from a bank. It can be difficult to obtain a bank loan for a business that is just starting out. Lenders often want to see progress in the business before lending money. You have a greater chance of success if you go to the loan interview prepared to explain all of the pertinent details of your business. Write a business plan so that the interviewer will see that you are serious. Borrow from your 401(k) or take out a second mortgage if a bank loan is not an option.

3. Ask family and friends for assistance. If your business does not qualify for a loan, family and/or friends may be your greatest allies because they are already rooting for you to succeed. If they can help you financially, they often will. However, be sure to draw up a professional promissory note to ensure that both your business and the lending party will be protected in the future. Take all steps necessary to avoid ruining an important relationship for the sake of your business.

4. Use your own funds, such as savings accounts or credit cards. Many people are hesitant to use the nest egg in their savings account to start a business, but it is wise to consider doing so to avoid incurring unnecessary debt. If you have money available on your credit cards, this is another option. However, it can be risky because of high interest rates. You can be stuck paying them off for years to come. Use credit cards wisely if you decide to follow this route to fund your business.

References

• U.S. Small Business Administration: What SBA Offers to Help Small Businesses Grow
• Inc: How To Raise Start-Up Capital