What are a few ways to finance the start-up of a small company?

2 Answers

  • JFAD
    Lv 5
    1 decade ago
    Favorite Answer

    You need a Business Plan and a Projected Income Balance Sheet. Cold-hard cash and where to find plenty of it is often the biggest roadblock for anyone starting their own business. But if depleting a savings account, borrowing from family and friends, or maxing out a credit card are not the answers to your funding woes, here are a few potential alternatives to financing your dream.

    The Small Business Development Center points potential small business owners to various Websites as avenues for ready cash. There are a lot of people who have great ideas, but are unaware of how to even put together a [business] plan. Websites from the SBA (Small Business Administration; www .sba.gov) are perhaps the most informative. You'll find tips on how to formulate and implement a bold and cogent plan. You'll also find a multitude of financing sources at www.ideacafe.com, and www.businessfinance.com.

    According to a sampling of industry experts, here are the five best ways to finance your business:

    * Personal Savings. Many new businesses purchase assets (machinery, office equipment, vehicles) and other start-up supplies and inventory with money from a personal savings account. However, these personal savings won't appear overnight. As soon as you feel the entrepreneurial urge-even if you're not sure what to do about it, you should begin to dedicate a portion of your earnings towards a business start-up fund that will be there for you when you're ready to take the plunge.

    * Trade Credit. This arrangement allows the business owner more time on the front end of the cash flow cycle, prior to payment from customers. These firms are often willing to extend 30, 60, or 90 days of payment terms to you as your exclusive industry supplier.

    * Commercial Banks. Generally, bank-lending practices aren't about helping start-ups get off the ground. Still, the SBA recently ranked the best bank-holding companies in the country by the amount of money they've lent to small businesses: Wells Fargo & Co., First Union Corp., Chase Manhattan Corp., Bank of America, and U.S. Bancorp to name five of the top 50.

    * Second Mortgage. If your fledgling business has neither sufficient assets nor a proven customer base to warrant serious consideration for a bank loan, a home equity loan is an alternative. When the business begins to achieve sales benchmarks and a regular cash flow, the loan can be converted to a more competitive rate business loan.

    * Angel Investors. These are wealthy individuals who are actively seeking true "ground floor" investment opportunities. This is usually done in the preliminary stages of an emerging company and the typical investment amount is $100,000 or less. The advantages of these 'angels' is that they can typically provide more than credit card financing, but less than a venture capitalist. Two valuable resources to guide you to an angel investor include: America's Business Funding Directory (www.business finance.com) and Money Hunter (www.moneyhunter.com). These two on-line and hard copy guides connect you to angels and other would-be investors nationwide. Also, check out ACE-NET (Angel Capital Electronic Network), an SBA-sponsored pilot program of Internet-based listings for entrepreneurs and investors, https://ace-net.sr.unh.ed/pub, 877-223-6383. Technology Capital Network, a nonprofit network based in Cambridge, Massachusetts, (617-253-2337) matches angel investors with entrepreneurs.

    Finally, while establishing and maintaining a steady cash flow will likely remain an issue for every entrepreneur, the road to financial freedom and independence is most obtainable through these sources.

    Source(s): Entrepeneur.com
  • Anonymous
    1 decade ago

    You can search the files of mycreditadvise.com there are articles about start up financing.

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