Small Business Startup Funding

For small business startup funding, new entrepreneurs may look to non-traditional financing sources. In an uncertain economy with more banks putting the clamps on lending, savvy business owners are exploring unconventional means of getting needed capital for startups. While some entrepreneurs may seek hard money lenders to fund ventures through high-interest long- or short-term loans, others are opting to join online networks which pair borrowers with investors and venture capitalists, also known as angels. In spite of a tight money market, there are companies which are seeking new ventures in which to invest cash, especially those industries which have potential profitability. Green and emerging industries, such as biotechnology, sustainable agriculture, and alternative energies, are making headway into the minds and hearts of corporate moguls with deep pockets and an eye for future growth. The current U.S. economic forecast is bleak; but emerging industries that create green jobs and reduce reliance on foreign oil have the potential to breathe new life back into a gasping nation.

In the world of national and global enterprise, it is not what you know but who you know. And when it comes to finding money to start a new enterprise, knowing the right people is half the battle. But a good product or idea, no matter how brilliant, requires adequate small business startup funding, or it will never be anything more than a concept. Web-based networks take the frustration out of finding income sources for new entrepreneurs and the toil for investors seeking places to invest cash. Without the services of Internet providers, there is absolutely no way to make cyberspace connections that can get a good idea off the ground and into the public domain. The free enterprise system in America is built from the premise that anyone who invents a great widget that has the capability of generating capital should be able to get financing for mass production, which generates jobs and creates a demand for goods and services.

By joining online networks which facilitate small business startup funding, new entrepreneurs can find sources of capital to pay for inventory, recruit and hire employees, or buy or lease facilities, equipment and vehicles. Beginning a new venture is much more difficult when banks tighten the purse strings. Even individuals and companies with near-perfect credit stand the chance of being turned down. But online networks enable people with creative concepts, innovative ideas, and ingenious inventions to find small business startup funding from unlikely sources. From domestic and foreign investors, venture capitalists, and corporate moguls, entities exist that are interested in finding emerging industries or unknown entities in which to invest. Capitalists theorize that backing startups that are unrated by Standard and Poor's or that do not have an established track record of success may yield high returns.

Online networks offer membership to those who seek small business startup funding and those offering capital. Users create profiles using a unique login and password, and a contact email address. Members offering financing create a profile which includes contact names and the kinds of enterprises which are of interest. Budding entrepreneurs get an opportunity to list requests for funding with a brief description of the type of venture proposed, along with a limited number of business plans and proposals. Some sites also offer employment postings which enable service providers, such as Internet technicians, graphic designers, engineers, writers, and marketing associates to partner with corporations looking for talent on a commission, freelance, or fulltime basis. Interested parties can search a global database for small business startup funding accessed by financiers from New York, Atlanta, Dallas, or Portland, to London, Copenhagen, Bejing, or Tokyo. Someone somewhere in the world has the cash new business owners need; and web-based networks bring the haves and the have-nots together, hopefully for a partnership that proves lucrative for both parties. However, lenders and borrowers not only share profits, but also risks. Before entering into a legally binding agreement, it is best to seek legal advice. "My son, if thou be surety for thy friend, if thou hast stricken thy hand with a stranger, Thou art snared with the words of thy mouth, thou art taken with the words of thy mouth" (Proverbs 6:1-2).

To find websites that offer networking opportunities for small business startup funding, budding entrepreneurs can browse the Internet. Many sites provide blogs from members that have successfully landed financing to begin new enterprises. Entrepreneurs should remember that success is not automatic. Owners seeking startup capital should spend time doing market research to gauge the potential success of a new enterprise; and hire a professional analyst to help construct a solid business plan. Businesses that have been turned down by banks can also log onto the Small Business Administration website for information on getting financed through low-interest federal loans. The government also offers bidding opportunities to sell goods and services to federal agencies across the country. Landing a short- or long-term contract could give a new business a decided edge when it comes to competing for loans.

Taking the time to prepare a business plan and calculate projections for short- and long-term earnings goes a long way in obtaining small business startup funding. New owners should also solicit the aid of an attorney and accountant to help review loans and terms for new ventures. Novice businesspeople may not be familiar with the intricacies of corporate finance. An attorney can advise against striking hands with unscrupulous investors, or those who will become partners in the company and its profits. Interested investors are impressed with budding entrepreneurs that present facts and figures and are not just promoting a pipe dream, but have taken the time to establish a company on sound legal and financial principles. Those who lay a firm foundation upon which to build a business will likely last through the storms of fluctuating markets and economic woes.

Small Business Capital

Raising small business capital can be a difficult venture, especially in tough economic times. But it's not impossible, especially for individuals who are motivated and well-prepared. Proper preparation begins with creating a detailed written proposal that outlines specific goals, provides relevant financial information, and includes a section on the company's history, its key personnel (including their expertise and professional experience), and targeted customer demographic. All of this information should be part of the company's ongoing growth strategy and easily accessible to upper management. But if it hasn't been prepared beforehand, the very process of pulling the information together can be an interesting and worthwhile exercise. For the first time, a company's management team may be required to give considerable thought to long-range goals and growth strategies. This can only benefit a company, especially when economic times are difficult and every dollar needs to be wisely spent to get the best return for its (shrinking) value. The company needs the information, particularly the financial data, to ensure the right amount of small business capital is sought. If the company borrows too much, revenue is wasted on financing costs. If too little capital is borrowed, it may not be possible to achieve the projected goals.

The specific goals will differ, of course, according to the company's size, its industry, and how long it has been in business. An entrepreneur who is starting a web-based consulting agency may not need much capital. For example, this person may already have the needed computer equipment, but requires financing for marketing and promotional purposes. This entrepreneur may be able to tap into personal savings accounts, a home equity line of credit (HELOC), or access credit cards to get the needed funds. But an established accounting firm may want to increase the number of employees on staff during tax season. The partners need small business capital to pay for office space and equipment, payroll, and advertising. For a reputable firm with longstanding financial relationships, a simple bank loan may be all that's needed to acquire the needed capital. These funds can be used to achieve the short-term goals of increasing staff for a limited amount of time. Even so, the partners will need to show the banking officials that they have a plan for repaying the loan and that the borrowed funds will produce increased revenue for the firm.

Lenders of small business capital will be interested in a company's financial records, whether the potential borrower is an entrepreneur or an established business. The entrepreneur will need to include detailed information on expected expenses to potential lenders or investors. Perhaps a person wants to open a coffee shop in a small town. Funds will be needed to either rent or purchase a suitable location, for the coffee-brewing equipment, disposable goods such as cups and napkins, and other expenses. The entrepreneur may enter a partnership agreement with an investor for a share of potential profits. She can also look into leasing space and equipment to reduce the upfront costs of starting the venture. Conversely, the management team of a chain of toy stores will be able to produce financial records that include past profit-and-loss statements, credit history, and other accounting records. This solid information can be used to borrow funds to expand product lines or to open new franchises. If the company's financial history is solid enough, management may obtain unsecured financing. However, depending on the particular circumstances, many small business capital investors will require some type of collateral. The chief financial officer for the toy store chain should have the expertise and knowledge to make good monetary decisions on behalf of the chain's partners or stockholders.

The Old Testament says this about lending money: "Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it" (Deuteronomy 23:20). Usury refers to interest rate. Many states have laws about usury rates because high interest rates can make it difficult for borrowers to pay off their small business capital loans. Companies, especially large ones, often find it difficult to operate on a cash-only basis. But companies with high debt levels are at risk of potential bankruptcy. Lenders and investors will look at a business plan's section on the potential borrower's history, key personnel, and customer demographic.

This type of information provides the small business capital institution with a larger picture, beyond the financial data, of a particular company's future ability to repay. The coffee shop entrepreneur should have some expertise in retail and be able to show research that the shop will be located in an area frequented by coffee drinkers. The toy store chain's management team can include a brief history of the company's long relationship with higher-income parents and grandparents. Also in this section, the management team can include the biographies of key personnel. These bios can list each person's relevant professional experience and expertise. With diligent foresight, both the entrepreneur and the toy store team can prepare a detailed business proposal with all the needed information to impress a small business capital lender. This detailed plan may mean the difference between being approved or disapproved for a loan that will enable the borrower to launch a business, expand a product line, or open new franchises. The Small Business Administration (SBA) is a federal agency that provides assistance to both entrepreneurs and established companies. The lending process is complex, but may be worth the time and trouble for some potential borrowers.

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