When you’re trying to start up a small business, the idea of finding the capital to get started can be daunting. However, don’t get discouraged. There are plenty of people and companies out there willing to invest in you and your business. The key is finding all the opportunities available to you and taking advantage of them:
* Banks. The most obvious place to go to get a small business loan is from a bank or credit union. They are in the business of giving loans. To determine which banks you approach, it may help to ask local business owners for names or small-business friendly banks. You may also have better luck going to a bank you already have a loan with, like for your car or home. Banks tend to reward customer loyalty so you are more likely to get a loan and maybe get a better rate.
* Small Business Administration (SBA). While they don’t grant loans to help you start or expand a small business, the SBA may be able to help you find someone who can. They also sponsor organizations that are dedicated to providing guidance that various types of small businesses.
* Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT). These are both programs run by the Small Business Administration that were formed to help ensure that small businesses get a significant piece of government research and development grants. They help award money to businesses on the forefront of technology and have helped secure over two billion dollars in grants so far.
* Small Business Investment Company (SBIC). These are small companies located all across the United States that are privately owned, operated, and funded, but are then regulated and supported by the SBA. Many well-known big businesses actually started as small businesses funded by SBIC loans. While they are a large lender to small businesses, they are not as public as the SBA so they can “fly under the radar” of big businesses and avoid small businesses being swallowed up.
* Family and friends. None of us like having to ask family or friends for money. We know that if something goes wrong, we could lose a friend or cause distrust and tension within our families. We also know that until we pay back the loan, we will often feel uncomfortable around the people we have borrowed money from.
Regardless of the drawbacks, there are positives to borrowing money from our loved ones. When banks and other agencies loan money, they look at your numbers and not who you truly are. Family and friends know you, so even if you don’t look good on paper, your family and friends are more likely to lend you money based on your personality.
* Government grants. While there are very few federal grants available to start up and expand small businesses, many states have programs for making small business loans. You will need to do some research on a state and local level. You may be able to find help from a local accountant or business association in finding available loans and grants in your area.
Regardless of where you go for money (or if you need to approach all these sources), you’re not going to do very well if you don’t go in prepared. You need to have pre-set business goals and a clear plan of how to get there. Research the market and have clear expectations of costs and potential profits. The more prepared you are, the more likely you are to get the money you need.