How to Really Finance a Start-Up Business
3 Simple Ways
by Joseph Lizio
If you have been in the market recently seeking some type of financing for a
new, start-up business, you are probably a little frustrated by now.
The thing is: Banks and most other non-bank or private lenders just do not
lend money to start-up businesses. That is just the way it is.
They claim that the risk is just too high and their regulators or investors
agree with them.
In fact, very few businesses last more than three to five years – the typical
loan term for a standard business loan.
But, just like many businesses before you, there are ways to finance your new
start-up:
First – always look to personal assets or personal means. Now, I know
that you don’t want to hear this but if you don’t have any other choice and you
truly believe in your business – then why not use your own assets or cash to get
that business off the ground and making money?
You want a bank or lender to take a risk on you but you won’t take a risk on
yourself – just does not seem fair.
Plus, I can guarantee you this: If you have your own assets at risk you
will work harder and longer to make sure your business does succeed (which is
the end goal anyways).
Second – other bootstrapping means. There are many ways to bootstrap your
business besides using your own personal funds or assets. You might look into:
Crowd funding – while this might not provide a huge amount of money, it might
provide enough to get started. Once started, other financing avenues will
begin to open up.
Friends and family loans – your friends and family know you best and if you
can’t sell your business concept and benefits to them then you will never be
able to sell it to paying consumers. Even if your friends and family can’t
or won’t invest in you, they may know of others who will – you just have to ask.
Micro credit lenders – backed by the SBA, these lenders provide more than
just small amounts of capital – usually up to $35,000 with the average loan
being around $13,500 – they also provide advice and guidance to help you better
manage and grow your operation.
Third - Look to partners or investors. If your business concept is not
in a huge market, has high and quick growth potential or has a lot of
proprietary assets, then you will have to look locally. Get out and
network in your community for other business owners or local investors.
You would be surprised at how many local or retired business owners just want
to give back to their community and can provide more than just capital but can
open up many other doors to you and your business. You just have to get
out there and talk to everyone who will listen. And, don’t be afraid to
ask. If you don’t ask, you will never get what you want!
While you might hear of others business owners landing some type of bank debt
or professional investment to get their business started; also know that there
had to be some outstanding circumstance or reason for it - like their uncle
being the president of a national bank or as a favor to a well known family
member or just simply that they have other sources of outside income that
qualifies them for the loan.
The bottom line is that banks and other lenders just do not lend to start-up
businesses.
In your early days, you really do have to go it alone. But, make it a
challenge. Make it one of your goals to eventually qualify for that
coveted business loan. This not only will help you financially manage your
new business better (keeping items like cash flow, collateral, credit and debt
ratios in mind) but, when you do get approved for your business loan, it will
really let you know that your business has made it to that next level and on the
right path to further success.
A true entrepreneur does not look at a failure to secure outside financing as
a fatal obstacle to starting their new business but, in focusing on the
long-term potential gains that business could provide, would easily utilizes
these three steps and other self-funding means to get up and running as soon as
possible.
As your business grows, more financing opportunities will open to both it and
you – you just have to get started.
Joseph Lizio holds an MBA in Finance and Entrepreneurship
and has a strong commercial lending background. In his current venture, Mr. Lizio is the founder of
www.businessmoneytoday.com - a site designed to help business owners find
and obtain capital to grow their businesses.
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