How to Get Financing for Your Start Up Business

Once the idea for a new business takes hold, the only thing holding you back may be funding. Finding financing for a start-up business can be challenging. With limited funds, business owners compete against each other to secure cash. To ensure success, it’s crucial that you learn everything you can about what it takes to start a business. Arranging the funding for your start-up business will be one of the most important steps to launching a new company.

Online Lending

Traditional lending is an option for start-up funding. However, online lending services are gaining popularity due to the simplicity of applying and the speed of approval. After submitting an application, you may get a decision within just a few days instead of the typical weeks or months you might wait for traditional lending. Experts predict that online lending may reach the point of helping more than 70 percent of small-business owners with business solutions.

• The State of Small Business Lending: Credit Access During the Recovery and How Technology May Change the Game (PDF): Explore funding options for small businesses with information included in this report.
• Instant Start-Up Guide (PDF): Every start-up needs cash to get off the ground. Learn important tips for beginning a business with this guide.
• Why Online Lending Will Take Off With Small-Business Owners: This innovative model for lending has drawn attention and praise.

Factoring/Invoice Advances

Factoring and invoice advancing are potential financing options for small-business owners. With this option, a lender will front you cash based on invoices that you have billed to your customers. Once you receive payment from your customers, you then turn around and pay the money back that you borrowed. This process can be an effective way to get a positive cash flow going in a company.

• Small-Business Financing: Why Are Companies Choosing to Factor and How Does it Work? (PDF): Factoring can be an effective way to get the cash you need for your small business.
• Demystifying Factoring: The Important Role it Plays for Today’s Businesses (PDF): Factoring isn’t a new financial option, but many people don’t understand how it works. This report explains factoring in easy terms.
• A Guide to Asset-Based Financing (PDF): Asset-based financing can be one option for a company’s working capital.

Product Presales

A company planning a launch of a product could engage in product presales to raise capital. After collecting the presale cash, you can pay for inventory and other expenses. Pay close attention to important details such as inventory coordination with delivery times to ensure that you will fulfill the orders you take in. It’s also important to forecast sales accurately to ensure that you don’t have a shortage of inventory.

• Valuing Pre-Revenue Companies (PDF): Valuation negotiations occur between investors and business owners.
• Inventive Financing Methods and Resources for Your Small Business (PDF): When cash flow is limited, inventive financing such as pre-revenue valuing can be an effective solution.
• Bottom-Up Sales Forecasting for Pre-Revenue Start-Ups (PDF): Use this workbook to explore creative financing options for a start-up.

Side Business

Working on the side can be an effective way to raise much-needed cash for business solutions. A business might start slowly before it takes off. When you work on it slowly while maintaining other income, you give yourself flexibility and time to succeed. You might even avoid having to find investors when you try this approach.

• Starting Your Side Hustle: Follow your dream by starting a new business venture on the side in your spare time.
• The Nine Facets of the Successful Startup: Polishing the Diamond (PDF): Starting a business on the side can be challenging, because your start-up will need attention and effort to launch it successfully.
• Start-Up Guide for Small e-Businesses (PDF): Small e-businesses can be lucrative, but they do demand attention and effort to succeed.

Selling Assets

Parting with valuable assets can provide your company with funds. If you have assets you are not using and no longer want, sell them to raise cash for your business. Place the proceeds into a business account, and use the money as you need it for the company. You can avoid costly financing fees by selling something valuable.

• Guide to Small-Business Ownership: Some small-business owners opt to sell assets to raise capital.
• Start-Up Basics (PDF): This start-up manual includes a chapter about financing, including the option of selling assets to raise capital.
• Capital Sources for Your Business: Explore ways to raise capital to fund business ventures and activities.

Credit Cards

Getting a business credit card can be a simple and effective way to provide your new company with quick cash. With convenient credit card processing and low minimum payments, you might choose to finance your start-up on credit. Proceed carefully to ensure that you don’t create a situation with high debt and high interest rates. You could even damage your personal credit with this type of negative situation.

• Untangling Your Commingling: How to Separate Personal From Business Finances (PDF): Be careful about commingling finances when you own a small business. Using a personal credit card can be risky.
• How Will You Finance That Business? Credit can be one source of financing for a small business.
• How to Manage Your New Startup Successfully While in Business School: A business credit card is a way to simplify a company’s financial management.
• The Role of Credit Cards in Providing Financing for Small Businesses (PDF): A small-business owner may experience higher finance charges for a business credit card than a large-business owner would.

Angel Investors/Venture Capitalist

Angel investors are investors who make it a practice to help start companies. Angel investors usually expect to receive between a 20 and 25 percent return on investment. Venture capitalists offer advice and capital to help business owners within specific industries. A business owner with a product or project might approach a venture capitalist for help.

• What Are Venture Capitalists Looking For? (video): This video discusses the process of securing a venture capitalist for business funding.
• The Art and Science of Angel Investing (PDF): Angel groups offer a variety of advantages for the entrepreneur looking for start-up capital.
• Bridging the Gender Gap in Venture Capital (PDF): The venture capital industry has developed significantly over recent years.
• How to Finance a Small Business: To get funding from an angel investor, you will need to know your business inside and out and have a solid business plan.

Winning a Contest or Crowdfunding

Instead of approaching one investor, you might consider crowdfunding. This type of pooled investment allows you to raise money to get a reward. Explore crowdfunding terms carefully before you become involved to ensure that you understand the agreement. You might also enter a business contest or competition to gain funding. By submitting a business plan or product idea, you could win valuable assistance from business experts, too.

• Crowdfunding Best for Community Startups, Panelists Say: Some types of businesses may be better suited for crowdfunding than others.
• Crowdfunding: An Exciting New Way to Fund a Project: Crowdfunding may involve investors buying shares in a business, making a donation, or offering financing.
• Crowdfunding America’s Small Businesses After the JOBS Act of 2012 (PDF): With crowdfunding, small lenders put their money together to help small-business owners with start-up costs.

Grants

Businesses within certain industries can be candidates for grant programs. As a grant recipient, you will likely need to adhere to specific criteria and goals. In exchange for meeting these requirements, you will receive money to use for your business. Review terms of grants carefully to ensure that you understand the requirements.

• A Guide to Small-Business Funding Opportunities and Incentives (PDF): Business owners may be eligible for funding via grants when the business meets certain criteria.
• 21 Terrific Grants for Female Business Owners (PDF): Female business owners may be eligible for a variety of grants that will provide funding for business ventures.
• List of Federal Grants for Business (PDF): Peruse this list of federal grants available for business owners.

Miscellaneous Small Business Information

• Small-Business Research Guide (PDF): Before starting a new small business, make sure you are prepared for the process and understand what it will entail.
• Starting a Small Business (PDF): After exploring your start-up ideas and formulating a plan, the next step involves securing financing to make it happen.
• Understand Your Market: Conduct market research before you move forward with a business to ensure that your idea is feasible.
• Types and Sources of Financing for Start-Up Businesses: Start-up businesses have several options for funding to gather the capital necessary to launch a company.
• Start-Up FAQs: Learn how much money you will need to begin a business as well as about different sources for securing the funds.
• Funding Opportunities: Small-business owners have many different grant opportunities, which can help with start-up costs.
• Obtaining Financing: A positive personal credit history will help a business owner obtain business credit for start-up expenses.
• Tips to Growing Your Small Business: If you are a small-business owner who can take advice from others, your business is bound to prosper.
• I Want to Start a Business: Owning and operating your own business takes specific skills and personal tenacity. Make sure you have the skills necessary to succeed.
• Business Start-Up and Resource Guide (PDF): Making a business plan will help you organize your new company and the funds you will need to start it.
• Questions to Consider Before Starting a Business: Answer a variety of questions about a start-up business to analyze competition and plan the company’s structure.