So you have a killer business idea and want to start a business. How will you get the startup capital you need to take your new business from idea to success? Here’s how to make money to start a business.
1) Your own pockets.
This may seem daunting at first glance but it is the most popular source of startup funding. No nest eggs? Many people get the start-up capital they need by mortgageing or remortgaging their home or selling their property or possessions—even those who are successful Start-up loan. That’s because lenders and investors often expect a personal financial commitment from entrepreneurs.
2) Family and friends.
The second most popular source of startup funding is family and friends who are often willing to offer startup loans and sometimes even outright gifts to help you start your new business. After all they are probably already “pre-sale” In a way the value of your business idea is for those who want the best for you.
3) A line of credit.
While not recommended as the sole source of start-up capital a line of credit is critical for the start-up phase. No matter how careful and detailed you are in preparing your business plan there will always be unexpected expenses and expenses that you underestimate.
Hopefully you are ready to access this source of funding by building a relationship with your local bank manager and making sure your credit rating is in good shape before you decide to go into business. No bank will offer a line of credit to the unknown For them especially if that person doesn’t have an established credit rating.
4) A business loan from a bank.
The term “bank” refers to traditional lending institutions such as banks and credit unions. In fact getting business loans from these traditional sources is easier than ever because more people than ever have successfully started small businesses and the big banks have more Interest in small businesses is greater than ever.
That said you can’t just walk in and tell the loan manager how much you want and expect to walk out with it. Applying for any business loan is a process you need to prepare for. See How to Get a Small Business Loan to learn how to make a successful loan presentation and start a business Increase the funds you need.
5) Business loans from business-related or government-sponsored organizations.
There are many organizations whose purpose is to promote economic development or provide assistance to help certain types of people become successful in business. Often (but not always) this assistance includes financial support such as a start-up loan.
In the United States the Small Business Administration (SBA) offers several types of small business loans. They provide loans of up to $50,000 for working capital stocking equipment or starting a business through a microloan program administered by a community nonprofit. Here is a list of microloans provider.
SBA’s 7(a) loan program also provides loans of up to $5 million through banks and credit unions to finance small businesses. These funds are used for working capital expansion and/or equipment purchases.
Don’t ignore BDC (Business Development Bank of Canada) in Canada. Backing the business is their business BDC provides business loans to start-ups to invest in:
- Working capital to supplement existing lines of credit
- Fixed assets
- Fund marketing and start-up fees
- A franchise purchase
- Consulting services
The Canada Small Business Financing Program (CSBFP) provides term loans of up to $1 million to help meet fixed asset needs through direct business loans from qualified lenders such as chartered banks Caisse Populaire or credit unions.
In Canada microloans are provided through economic development organizations in each province and territory which provide entrepreneurs with support and services including financial assistance. For example the Ontario Community Futures Development Corporation (CFDC) operates in select communities rural and northern Ontario while the Community Business Development Corporation (CBDC) serves rural Atlantic Canada.
Many women’s and government organizations also provide financial assistance including start-up funds to women in business.
Find more potential lenders in these articles:
In the U.S.
- Learn About Small Business Microloans
- Microloans for Women in Business
- Best Business Loan Programs for Veterans
In Canada:
- Start-up capital for young Canadian entrepreneurs
- 10 places to get a small business loan for your Canadian small business
- 20 Sources of Microloans to Start a Small Business in Canada
6) Participate in government-funded entrepreneurial programs.
If you qualify this is the best way to start a business. In Canada programs such as the Self-Employment Program (for individuals eligible for Unemployment Insurance) and the Seed Capital Connect Program for Young Entrepreneurs (for young entrepreneurs in Atlantic Canada) offer not only Startup money but valuable help such as mentoring and help with developing your business plan. These are just two such launchers; there are others.
7) Finding investors.
Angel investors venture capitalists or private lenders can all be excellent sources of funding for your new business. While it’s certainly harder to attract investors to startups rather than established businesses in most cases it’s not impossible if you have the right business The idea of the right time backed by an impressive business plan.
8) Government grant programs.
While this is often touted as a great source of funding for startups it’s not the truth that most startups simply don’t qualify for the Canada Small Business Grant. While there are government grants available one can Your new business is a business in itself (which is probably why so many companies offer funding to find services).
Those planning to start “the right business” will have an easier time finding government grant schemes that may provide the funding they need. Generally speaking grants are only for specific activities that the government wishes to encourage. such as the generation of efficient renewable energy Energy is a priority for the federal government so businesses involved in cogeneration (using one fuel to generate both heat and electricity) or renewable energy technologies will find more opportunities for government funding than others. If you are interested in getting funding to get Funding You Need to Start a Business 5 tips for finding small business grants to help narrow your search.
Which Startup Funding Source is Right for You?
Like most people who started a business before you you need multiple sources of capital to get the capital you need to grow your business. You might even want to explore all the resources listed above.
But whatever you do don’t rely on your personal credit card to get the startup capital you need. It’s better to wait until you have the funds you need to start your business rather than financially cripple your new business and potentially ruin your personal credit score.
