You Have the Idea — Now Where Are You Going to Get the Money?

Entrepreneurship can be described in stages. Sometimes, the hardest stage is coming up with a viable and market-worthy idea. Being able to transform that market-worthy idea into a sustainable business requires financing. Financing that idea, or even your business, can be a ‘make or break’ proposition. Financing itself can be classified as either debt (e.g., loans or bonds) or equity (e.g., sweat equity, angel or private investors). The following takes a look at some of the debt and grant financing available for growing your idea and business.

Self/Cash Out Financing

In seeking financing, you are often asked what funds you can provide (i.e., “Are you willing to invest in your own idea?”). Potential financiers instinctively want assurances regarding the safety and security of their investment. Thus, adding your own money adds security. You probably already have equity “locked up” in some assets. Cash out financing allows you to ‘free up’ some of that equity and convert it to cash for your financing needs. It might be easier to justify using your own funds if you know that the business you are investing into is already successful. For example, many franchises seek people with all kinds of backgrounds and with a entrepreneurial spirit, just as long as they are willing to pay the fees, they should be able to jump head into a successful franchise.

Private Investors

Private investors are an excellent source of funding. Such investors can range from an informal network of friends and families to more formally structured relationships with angel investors or even venture capitalists. The funds provided can vary widely in structure. Often, milestones will be established as part of the terms to help assure business growth.

SBA Small Business Loans

The government actually is in business to help your business do business, at least in part. The Small Business Administration (SBA) offers many programs to help small businesses grow. The SBA uses multiple loan programs to help small businesses grow. Some of their loan programs help veterans through VA loans, others who are wanting to start or expand their business, and many more. They might even be able to help you in whatever situation you’re in!  

Industry Grants

Free money is the best money. Grants are the closest thing to ‘free money’ because they offer cash for your business that usually does not have to be repaid. Typically, industry grants are available to businesses which offer some product or service that closely aligns to a particular interest of the granting institution. Grants are available from a wide source of entities (e.g., governments (federal, state and local), as well as private businesses or institutions).

Conclusion

Most people say you have to have thick skin to be an entrepreneur because you frequently hear “No.” This may even be true with the multiple types of funding discussed above. Whether seeking private investors or SBA loans, or even industry grants, the financing is out there to help you find success for your business and idea.

If you’re looking to start or expand your business and need the funds, make sure to check out our “Funding” section and see how we can help each other! We have a great network and reliable connections that we can use to help get your dream started!

References:

Bank Rate

Small Business Administration (SBA)

VA Home Loans

Angel Investor Network

Franchise Gator

Improvement Center



Leave a Reply

Bitnami