Properly Fund Your Business

Thursday, May 12, 2011

Money gets your new business up and running. It keeps it running. Money also keeps a roof over your head and feeds your family while your new business finds its legs.

“You need to do the proper financial projections to start your new business,” says Gene Fairbrother, the lead micro-business consultant for NASE’s Business 101 program. “For example, if you just get $15,000 to start your business, but you actually need $50,000, then you have to bootstrap.”

As Fairbrother explains, bootstrapping means getting along with less. It’s a way of funding your business with the cash that your company brings in. That means only spending as your cash flow allows. And cash can be tight when you’re just getting started.

So rather than bootstrapping, Fairbrother recommends trying to acquire a loan to get your new venture started.

Here are some financing options to consider.

Traditional lenders

A traditional lender should be the first financing source to consider. Think banks, credit unions and non-bank lenders such as finance companies.

Most lenders have a small-business department. Some also administer SBA loan programs. Start with the bank or credit union where you have your business accounts.

Venture capitalists

Venture capitalists want to make money for their firms and their investors. So it makes sense that they look for firms with high, fast profit potential. If you think that describes your startup, a reputable place to begin your information search is at the National Venture Capital Association.

Government sources

Don’t forget Uncle Sam when you’re looking for cash.

The federal government offers programs that:

  • Assist women, minorities and military veterans
  • Provide short-term capital needs
  • Help fund exporters
  • Stimulate business development in enterprise zones
  • And more

Begin your search for a loan program online at the U.S. Small Business Administration. At the website you’ll find information about the different types of loans, application requirements and more.

You can also use the Loans and Grants search tool at Business.gov to get a list of financing programs for which you may qualify.

SBA Microloans

The SBA Microloan Program provides small, short-term loans.

The SBA makes funds available to specially designated intermediary lenders, which are nonprofit community-based organizations. These intermediaries make loans to eligible borrowers. The maximum loan amount is $50,000, but the average microloan is about $13,000.

You can use microloan funds for:

  • Working capital
  • The purchase of inventory or supplies
  • The purchase of furniture or fixtures
  • The purchase of machinery or equipment

Small-time cash

If your financial needs are so modest that you can’t interest a lender or get a microloan, you have other financing options.

For instance, you may be able to secure a personal loan from a lender. You might also consider borrowing money from family and friends. If you opt for this route, be sure to put all agreements in writing. The document should specifically address the schedule of repayment, interest rate and consequences of default.

Credit cards can be a financing tool, too. But be careful. Only use the cards to purchase materials or equipment that you can pay off quickly so you don’t incur enormous interest payments.

NASE Growth Grants™

The NASE can help you launch your business with a business development grant worth up to $5,000. These grants can be used for marketing, advertising, hiring employees and to meet other specific business needs.

The grants are available to NASE Members in good standing, and you must meet other eligibility requirements.

Learn more at NASE Growth Grants™.


The NASE can help

Learn more smart ways to finance your startup business. These NASE articles can help:

To print, click here to download the full Startup Kit.