You have the idea, you have the plan, but now you need the money to make your small business idea come true. Finding start-up money can be a huge barrier between the wanna-be entrepreneurs and the ones that are serious about starting their own business. Here is a list of five different ways to raise some start-up capital with my opinion on what direction you should take to get your business started on the right track.
Angel Investors and Venture Capitalists
There are tons of companies and wealthy individuals out there looking to invest in the next big company or product. However, they may seem generous to fork over there money, but it will come with a price. Usually, angels and venture capitalists want a piece of your pie. They may seem like they are only going to throw the money at you and let you run with it, but they will quickly become your board of advisors. They’ll want a part in the decisions that you make. Be sure that if you sign a deal with one of these investors that you read the fine print, and work out a deal that gives you the freedom to make your business decisions. My personal opinion is that many businesses fail because they start out so far in the negative. Accepting huge loans to finance a start-up is extremely risky, and it should be a decision that is handled with care.
Small Business Loans From Your Local Bank
This is not much of an option. Many banks will not loan you money without generating some kind of substantial revenue or profit. They want to see a track record before they shell out their money. Again, taking a large loan to start an unproven business is extremely risky. Why do you think banks are reluctant to lend you money? They are taking a huge risk that you’ll never be able to pay them back!
Using Credit Cards
The risks are obvious with this one. You’ve got huge interest payments, and credit cards love to charge hidden fees. It’s been said that the founders of Google and YouTube started their business by financing it solely with credit cards. However, for every huge success story that financed their start-up company on credit cards, there are probably a hundred that failed and are still paying off their credit card bills with no business to show for it. Are you seeing a common theme here that I think financing a new business is extremely risky?
The Use of Creative Streams of Income
If you have an entrepreneurial mind, then it shouldn’t be hard to find several ways to raise some side income with little effort. One of the more popular ways to start generating some extra income is selling stuff! Look around the room you are sitting in right now and see what you could sell on eBay. I bet you saw at least five different items. Your house is a treasure chest waiting to be opened on eBay. And don’t pass up the obscure stuff! A friend of mine once bought a swiss alphorn in Switzerland for $1,000, and he resold it on eBay a few years later for $1,800! Start a side business doing grunt work. You could clean houses, detail cars, mow lawns, organize garages, fix computers, or do landscaping. All of these tasks will take hard work, but they will generate some serious cash. Be disciplined to keep all of your earnings from these other streams of income and save it for the business that you are passionate about. This is only a temporary solution to creating a business that you love and believe in.
Ask For a Raise or Start Asking for Overtime
There are numerous opportunities to make more money at your current job. It never hurts to ask for a raise, and you never know what your boss is going to say. Shoot for a 10% increase, and that will leave you with some negotiating room. If you get the raise, dedicate all of that extra income to starting your new business. If there is an opportunity to take on a new project, work overtime, or work extra shifts. Be the first to jump on it. Again, when you’re coming home at 9pm, you’ll be hating life, but just think about what it will be like to start a business with little or no debt.
It’s getting easier every day to start a business with little money. Some businesses only require some business cards, fliers, a website, and salesman’s pitch. If you want to start a restaurant, you may need to get some financing, but I would recommend trying to start saving some money for it first. Take some time to think through your business idea. Think about the worst case scenarios. By saving up for your start-up capital, this will allow you some time to think about the pros and cons of your business. Overall, don’t let money get in the way of your dream. If you are passionate enough about it, you’ll find a way to start your business and be successful.
This article is written by Erik, a guest writer, and author of Money Crashers.
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Thats A Good Lil Article M8!
Google founders might have used the credit cards to get started, but Im sure that $100k check from their angel investor helped.
Good article, worth the long read
Great article, thanks for guest posting
Google got started with very little capital, they used some credit. But they managed to raise some money from random angels, and then a while later they got 100k from another angel.
I read a book about google at Salt Lake City during the 6 hour delay heh.
Wait….who’s this by? Maybe you should have that in the guest articles…
God your dumb, first of all there is no guest article cat. second it says who its by in the last sentence of the article…
Great article Jon!
I didnt write it, its a guest post by Erik at moneycrashers.com
Great article. I thought about starting my business using a credit card, but I’m a little scared to do that. That’s going to be my last resort.
Great reading Erik, kudos
Thanks for the comments, I appreciate the encouragement. I’ll start posting business/entrepreneur articles fairly regularly, so just let me know which ones suck and which ones are good.
Nice post, but surely it depends on the scope of your project. There is a big difference between approaching venture capitalists and mowing lawns!
Si
PS - What’s with the porn bit in the Digg link?
Great post, I’ve always wondered about this kind of stuff.
I’m still paying off the credit cards from a business I didnt get off the ground five years ago, The idea was solid at the time, but my marketing was way off and it sunk. Would do it again tomorrow though.
It´s a very good website you have here,
YES,VERY GOOD WEBSITE!
Hi from New York And thanks for the web site. It was just the thing I had been looking for. It has helped me no end. Thanks again