Small Business Start Up Capital

What is Small Business Start Up Capital?

What is start up capital and how does it work for small businesses? Whenever you start a business, whether it's selling products or services, you need money to make things happen. You may need equipment for a cleaning service, or products to sell, or even raw materials in order to make your product or service, and start up capital is there to help purchase these things. It also is needed to advertise your business, putting ads in the paper, getting listed on an internet directory; all of these need money to work.

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So now that you know what it takes to get a business on its feet, where are sources of small business start up capital? There are many different places to get the money to get started, and each has its risks and benefits. The first source that may be the easiest is to borrow money from family or friends. They are the easiest sources to approach, and they will many times be more inclined to help you out just because they know you. However, the biggest obstacles when approaching these sources is that often times your friends and family may be as poor as you are.

Banks and Lending Brokers

Another way to go is to apply for the start up capital is through a bank or other lending broker. The advantages of getting the money from one of these sources is that you get it all at once, there are terms and agreements, you have set dates and times when you repay, and often times you can either pay in whole, or in convenient payments over time. The biggest problem using this source is that there are many hoops to jump through, paperwork to be filed, putting up collateral, etc. If you default on the loan, not only can they take the collateral, you may also loose all your equipment or products you have. Your credit is pretty much ruined right then and there.

Small Business Administration (SBA)

The government's small business administration can help you with small business loans, which are guaranteed by the government, as well as many other tips on funding sources. You can apply directly through one their SBA sites, and they are often connected with banks and other lenders.

Private Investors

Business entrepreneurs are people with money to invest. They often will risk their money on small businesses, with the hopes of capitalizing off the future profits from their investment. These people are the hardest to convince but can be found through investment groups. You contact them, present your ideas, and they either say yes or no.

Small Business Start Up Capital - Business Plans

No matter what resource you use, you must have a business plan that is precise. It must show exactly what the money will be spent on, why the money will be spent on a particular item, as well as what products or services you will be providing. You must also present in clear details why your business will be a wise investment for lenders, budgeting plans, etc. There is plenty of information on all the aspects of a business plan, as well as the best ways to cold sell people. The more detailed the plan, the better off you are, but it is also a good idea to practice you presentation many times before approaching a lender. Read more about small business plans here>>

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