How to get money to start a small business
There's a multitude of ways of getting money to start your own business and to help those looking I've listed a number of ways you might want to consider.
First off SAVE AS MUCH YOU CAN BEFORE YOU START.
I had the luxury of coming straight out of University with no money and in slight debt so took the self employed plunge straight away. Without family responsibilities and financial pressure I didn't have to much to worry about whilst I set my business up and got going.
However if you have bills to pay and mouths to feed you'll want AT LEAST 3 months salary in the bank to help you over the first 6 months or so when you set up shop.
Its also an idea to put a portion of what you earn away from each project so that if work does dry up and you have a lean period you'll have something to fall back on. trust me from experience on this one! Once you go down the route of having to work elsewhere you're spending valuable time that could have been used to source new business.
Approach a local bank.
Most of them want business owners as you'll be a more active bank customer than the average personal or checking account customer. In fact you may even find it rather too easy to get loans as banks can chase new business customers and offer very competitive deals. Play hard to get if you feel more than one bank is courting your business. Driving down the interest rate of loans and costs of processing cheques and putting an overdraft in can save serious amounts of money down the line.
The bank will want details of your business though there is a backdoor route of having a personal loan instead - but that means you won't have been honest with the bank as to your intentions with their money. Not a route I personally recommend (seeing as I am married to Bank Manager!)
Borrow from friends or family.
A risky venture as this depends on how positive your relationship is with the friend or family member you are borrowing off.
Any money you do borrow ENSURE you draw up a contract to say what is to be paid and at what rate and over what period - this protects all parties. Borrowing money like this is risky - assess how strong your relationship is with the family member or friend lending you the money. If you feel you may, down the road, fall out with that person over money then do not borrow from them. Its as simple as that.
Grants and government funding
Many governments support organisations and initiatives that may be able to secure grants, loans and funding for new businesses.
A couple I am aware of here in the UK are BusinessLink and The Princes Trust.
Lease Funding
This may be a route you wish to go for the purchase of expensive equipment - this can help with cash flow. Also banks prefer to spread the risk of lending so if you're already lease funding you may find a bank is happier to lend you money.
Don't be tempted to spend more than you can comfortably afford to lease. It might look good in the office but if it costs twice as much per month then thats going to eat into your spending far more than you thought.
Avoid leasing a flash new car. Wait a while (like 2 years) before considering a car - a brand new vehicle does not make your business, so unless it is a total banger and gives a poor impression of you then live with it for a while.
Venture Capitalists
You could approach Venture Capitalists though with the online boom and bust era long gone but still painful in memory you may find these types of investors wary of new small businesses.
In most cases when you're looking to get any kind of funding you're going to need a detailed business plan - a roadmap for your business' future development. Without one its highly likely nobody is going to take you or your small business seriously.
So what you waiting for? Go get that money to start your small business today!
Cheers
ukdaz
First off SAVE AS MUCH YOU CAN BEFORE YOU START.
I had the luxury of coming straight out of University with no money and in slight debt so took the self employed plunge straight away. Without family responsibilities and financial pressure I didn't have to much to worry about whilst I set my business up and got going.
However if you have bills to pay and mouths to feed you'll want AT LEAST 3 months salary in the bank to help you over the first 6 months or so when you set up shop.
Its also an idea to put a portion of what you earn away from each project so that if work does dry up and you have a lean period you'll have something to fall back on. trust me from experience on this one! Once you go down the route of having to work elsewhere you're spending valuable time that could have been used to source new business.
Approach a local bank.
Most of them want business owners as you'll be a more active bank customer than the average personal or checking account customer. In fact you may even find it rather too easy to get loans as banks can chase new business customers and offer very competitive deals. Play hard to get if you feel more than one bank is courting your business. Driving down the interest rate of loans and costs of processing cheques and putting an overdraft in can save serious amounts of money down the line.
The bank will want details of your business though there is a backdoor route of having a personal loan instead - but that means you won't have been honest with the bank as to your intentions with their money. Not a route I personally recommend (seeing as I am married to Bank Manager!)
Borrow from friends or family.
A risky venture as this depends on how positive your relationship is with the friend or family member you are borrowing off.
Any money you do borrow ENSURE you draw up a contract to say what is to be paid and at what rate and over what period - this protects all parties. Borrowing money like this is risky - assess how strong your relationship is with the family member or friend lending you the money. If you feel you may, down the road, fall out with that person over money then do not borrow from them. Its as simple as that.
Grants and government funding
Many governments support organisations and initiatives that may be able to secure grants, loans and funding for new businesses.
A couple I am aware of here in the UK are BusinessLink and The Princes Trust.
Lease Funding
This may be a route you wish to go for the purchase of expensive equipment - this can help with cash flow. Also banks prefer to spread the risk of lending so if you're already lease funding you may find a bank is happier to lend you money.
Don't be tempted to spend more than you can comfortably afford to lease. It might look good in the office but if it costs twice as much per month then thats going to eat into your spending far more than you thought.
Avoid leasing a flash new car. Wait a while (like 2 years) before considering a car - a brand new vehicle does not make your business, so unless it is a total banger and gives a poor impression of you then live with it for a while.
Venture Capitalists
You could approach Venture Capitalists though with the online boom and bust era long gone but still painful in memory you may find these types of investors wary of new small businesses.
In most cases when you're looking to get any kind of funding you're going to need a detailed business plan - a roadmap for your business' future development. Without one its highly likely nobody is going to take you or your small business seriously.
So what you waiting for? Go get that money to start your small business today!
Cheers
ukdaz
posted by Darren Moloney at 10/18/2006 09:44:00 am
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