Starting a new business is not a task to be taken lightly. Finding the right market, choosing a location, identifying the product or service that would best make the owner a fortune--these are all subjects that will require budding entrepreneur's full attention in the early days of a new start-up. But perhaps the most difficult part of starting a new business is finding the money to do it with. The money is out there; you just have to know where to look for it.
The Government
While it is a commonly held belief that the government gives out grants and loans that don't need to be repaid, this is simply not the case. In fact, the government itself does not give out any money at all to help small businesses. However, the Small Business Administration helps put entrepreneurs in touch with lenders who will. Because loans given out through the SBA are federally insured, lenders are often more willing to jump on board in an applicant has gone through this channel rather than straight to the source.
Angels
Angel investors are investors who have made their money and are now looking to give back to the community. While these investors are looking to make a profit with their investments (or possibly stake some sort of ownership in the company), they are usually more charity minded than venture capitalists. Venture capitalists do much the same, but they are usually not working with their own money. Instead, they are investing their clients' funds, and a good return is all they are concerned about.
Friends and Family
They say never to mix business with family, but some of the greatest companies in the country were started off the backs of friends and relatives. Obviously, your ability to borrow money from friends and family will depend on their financial well-being, but as long as it is healthy, this is often the easiest way to go about getting a start-up loan. The terms are usually much more favorable. On the other hand, a person usually doesn't worry too much about a strained relationship with his banker if he defaults on a loan.
Credit Cards
This is the poorest choice for a business loan, but it is one that many have made with positive results in the past. The reason this should be the order of last resort is because of how exorbitant credit card interest rates typically are when compared to APR rates on a small business loan. Still, if a small business start up cannot secure a loan through traditional means, credit cards may be the only option if they are to get their business off the ground.
Warning
Start-up businesses in search of capital are particularly juicy prey for scam artists. So-called loan brokers make all of their illegal money by targeting small business start-ups with offers that seem too good to be true. Many of these scam artists make their money by charging an upfront processing fee when the owner comes looking to them for money. This fee may be as high as a couple of thousand dollars, but the loan broker will assure the entrepreneur that the money is completely refundable once the loan goes through. Of course, after paying the fee, the loan broker is never heard from again. Small business owners should be very wary about the companies and individuals they go to for capital.
