How do I Finance for a Small Business Startup?

Financing a small business just starting has never been easy. There is much work that goes into preparations for approaching investors or banks for funds, and without this work and research, your chances of scoring money for a start-up are slim. The heart of getting start-up financing is having a well researched business plan that has been run by experts and experienced investors.

Instructions

1. • 1
     Expand your management resume. Getting a good management education through experience or university training (both would be ideal) should be a major priority. If you have little experience, then trying to get a loan is probably out of the question. A great idea might interest venture capitalists.
   • 2
     Write a business plan. Write your projected essential start-up costs. Show potential investors that you are able to control costs and decide what expenses are absolutely necessary. Include with these costs the state of the market for your industry and the nature of your competition. This is essential in figuring when you can break even and begin earning profits. Take your time with the research when writing out a plan.
   • 3
     List all the advantages and disadvantages of debt vs. equity financing in your business plan. The basic issues are control over business decisions versus going into debt. Giving up some control by issuing stock might be a good idea if you are going into uncharted waters or are insecure about your business acumen. The big difference between loans and equity financing is that the former places you in debt to the bank, while the latter brings in partners without debt.
   • 4
     Gather as much collateral as you can. If you are borrowing, collateral is a must. According to the Small Business Administration, the best forms of collateral are homes, equipment and Certificates of Deposit. Other assets such as jewelry or automobiles are either not accepted or are discounted due to depreciation.
   • 5
     Get your credit report. The bank or investors will want to see your credit history and ability to repay debts. One of the bigger issues banks are looking for is a good faith effort on your part to pay debts and engage creditors rather than ignoring them. Report everything and do not present your credit with the intent of hiding anything, because this can be construed as fraud. Make sure that if there are large debts that have extenuating circumstances such as divorce or illness, that this is explained to the bank being approached.