Creative Financing For Your Small Business

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Creative Financing For Your Small Business

Finding start up money for your new business can be a daunting task even for the most groundbreaking new business.

Many new companies may need to be creative in their finance seeking. Here are some ideas for new small businesses.

Loans from Friends and family

In the early stages of any new business, some entrepreneurs have asked friends, relatives, colleagues or other people that they know well, to help with their new business. Friends and family do not usually need to see a business plan, so financing is more informal.

It would be wise to draw up a contract to prevent any misunderstandings with your financial arrangements.

Small Business Funding from Banks

New business may find that obtaining a traditional bank loan initially difficult. Banks typically like to see a company in business for at least two years before they will consider funding. They have many requirements that must be met before approval of the loan.

Manufacturing company buildings or those using heavy equipment are usually the exception to the rule. Banks will loan money based on your ability to pay the loan back. They are more likely to finance a company that has a greater value.

Applying for a loan that is guaranteed by the Small Business Administration is the best possible scenario. Once businesses qualify, owners may still need to pledge their home as collateral for final approval.

Bootstrapping you Small Business Loan

Using whatever resources you have on hand to help you get your business to the next level is considered bootstrapping. Most new company’s start up costs come from personal savings and home equity loans.

Some businesses have used credit cards to aid in paying for start up costs. It is estimated that one-half of all business begin by using credit cards. Owners must be very careful when using cards. The finance costs could be crippling to any business, especially a new one.

One well known, successful company that financed most of their initial costs was Google.

If you use your credit cards, be sure to make your credit history a top priority. Never be late on a payment and pay back as much of the loan as possible, as soon as possible.

Looming debt or bad credit ratings will affect you adversely if you apply for a Small Business Loan or other type of loan in the future.

Funds from Suppliers and Customers

You may be able to convince some suppliers to hold inventory for you until a certain date. You would need to provide them with final date in which all supplies will be paid for in order for them to even consider such an option.

Some customers may be willing to fund your products as long as you are willing to customize them for their own businesses. Here’s our review of ZippyLoan to see if they can provide the type of loan your company needs.

Fund your Small Business loan with Grants

Small Business Innovation Research Grants (SBIR) is available if your company is a technology business. This is a federally funded program that mandates that certain agencies set aside part of their budgets to fund high-tech companies with interesting inventions that they want to commercialize.

Grants are also available for women and minority-owned businesses. Funding for Grant programs is very competitive, but if you are lucky enough to receive one, you will likely attract other investors who are interested in your company.

Venture Capital

Not the best option for new or early stage businesses. If your company already has a proven track record with promises of high returns, it might be worth investigating.

Funding from Angels

Most “angels” are interested in companies that are further along in the development stages as a general rule. If you have a product or service that is currently out on the market and a proven management team, you might want to try this route.

Angels are private, high net-worth individuals, who typically invest between $50K to $2 million in companies. They can also provide expertise and useful contacts in the industry. There are “angel clubs” that have formed nationwide. They meet on a regular basis to hear brief presentations from entrepreneurs seeking money. They often give money jointly to companies as an investment.


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