Financial Assistance to Start New Business
Entrepreneurs seeking financial assistance for new business start-ups have a variety of support options to choose from. The Small Business Association (SBA) and other organizations or individuals like angel investors offer creative and alternative funding methods for prospective businesses.
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SBA Guaranteed Loans Program
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The SBA Guaranteed Loans Program provides SBA-backed loan options to new businesses and start-ups that do not qualify directly for lender financing. While not a direct provider, the SBA agrees to shoulder the risks of certain third-party loans by providing a guarantee to the lender that a business will eventually repay. Each SBA loan program has a unique set of requirements that new businesses must meet in order to participate. To help new businesses prepare for the loan process, the SBA.gov website offers a checklist for all the documentation required and plenty of advice on increasing the chances of qualifying.
Specialized Grants
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Hard to obtain and not intended for business start-up, federal government grants are only awarded to non-commercial, non-profit organizations like schools and hospitals for specific research studies. State and local programs, however, and some non-profits provide a wider selection of grant opportunities including those for disabled persons, minority- and women-owned businesses, performing arts and writing, and innovative design and invention companies. To help research available grants, Business.gov provides a detailed search tool that locates grants based on answers to questions about the prospective business.
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Angel Investors
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Another way to obtain start-up capital is to appeal to the interests of private investors and philanthropists known as angel investors. Angel investors are wealthy, accredited investors who provide capital for promising start-up companies. Preparing a business package for Angel Investors includes writing a solid business plan, knowing the background of the investors, and building a creative presentation. Since angel investors generally focus on a specific industry, presentations of industry-specific ideas or products are likely to have the most appeal and attract the most attention. Investment awards can reach as high as $2 million with final costs to the new business ranging from 10 to 50 percent of equity.
Crowdfunding
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Recently listed at Entrepreneur.com as a top 2011 financing trend among start-up companies is a method for generating money called crowdfunding -- a way to generate start-up funds by collecting several little donations from a large group of people. Neither a loan nor an investment, crowdfunding quickly became popular because, for the most part, nothing more than a quick, free service is expected in exchange for each small bit of cash.
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