A great business idea without money is like a brand-new car with no gas: Both are sweet to look at but don't go anywhere. Fortunately, there's a wide range of sources you can tap to drum up money to fuel your new venture.
Write a comprehensive business plan. This document outlines your idea, including how you plan to develop it, and most important, how you see it making money. Consult the wide variety of books, or type "business plan" into a search engine for more sources to help you write a business plan.
Build a convincing business model for your company. This will have detailed financials that describe every aspect of your business, including costs for sourcing or manufacturing your product, projected sales, and marketing expenses as well as general and administrative overhead.
Determine how much money you are going to need. Include start-up funds and sufficient capital to keep the business afloat until your revenue covers your expenses. Add up all of your anticipated expenses during start-up: Salaries, building leases and equipment purchases, furniture, office supplies, telephone service and business card printing (see How to Hire a Graphic Designer). The more specific your list of expenses, the lower your chances of running out of money.
Seek out help from those who have done it before. Consider offering them stock in your company for their assistance, but not before you decide if you want to retain full ownership.
Hire a reputable law firm to set up the legal structure of your business. Business entities come in many forms and include S or C corporations, limited liability corporations (LLC), partnerships and sole proprietorships. Set up your business correctly from the beginning to facilitate financing and shield your assets. Use a firm with experience handling companies in your field.
Work closely with your law firm and create a financing structure. Determining the deal you give to investors, and codifying it properly, is crucial to eliminating problems down the line. Decisions include whether to take money as debt or to give up equity, what kind of rights and privileges (if any) come with being an investor and, most important for them, how investors get paid back.
Decide what kind of investors you want. Many companies want powerful executives or financiers as investors, but find them meddlesome and impatient. Friends and family can be an excellent source of friendly money, but investing in start-ups is risky, and relationships can go sour if people start losing money.
Use your savings. Any lenders or investors will expect you to fund your business to the best of your financial ability and selffinancing is the best way to retain control.
Go to a bank or credit union that you have a relationship with, and ask about a business loan. You'll likely get a better reception from an institution you have a proven track record with than from a new lender.
Turn to vendors you plan to use and ask whether they would be willing to provide products or services up front, as a means of reducing your start-up costs, in return for full payment plus interest within a specified amount of time. Their ability to do so may lower or even eliminate your need for external financing.
Ask potential suppliers if they would help finance your company, either by providing extended payment terms or extending a loan. Since vendors have the most to gain when it comes to landing a significant contract, some may be willing to give you some starting help in return for a guarantee of business.
Put up collateral. Depending on the size of the loan, you might offer your car, house or other type of property.
Investigate the government's Small Business Administration (SBA.gov) loan programs. The SBA oversees programs that guarantee small-business loans, and encourages banks and other institutions to fund businesses they might otherwise turn down. The terms and fees are usually comparable to conventional financing.
Tap into your own assets. Many entrepreneurs have valuable assets they can borrow against to start their business. Home equity is the most obvious choice, with the added bonus that interest payments are tax deductible. Some 401(k) programs and life insurance policies may also be borrowed against. Entrepreneurs have to gauge the degree to which they leverage their personal assets against the risks of start-up businesses.
Consider using a credit card. It's relatively easy and quick to get needed funds from your credit cards through cash advances, although the interest rates are much higher than those from other sources.
When it comes to business financing, investigate all possibilities. Often, you can combine funding from various sources to create a suitable package. The only grants available these days to entrepreneurs are hard to find and most require some investment on the part of the business owner in order to qualify. Call your local small business development center to find out about available grants.
Although investors provide what seems to be free money, they also want to own a portion of your business in return. Many venture capitalists and angel investors will only consider business opportunities where they can own 20 to 50 percent of the company.