Can you still find money for starting a business?

Was “Where do I find money for starting a business” your next thought right after you decided to start a business? If so, you're not alone. Everyone has to figure out at least a little financing for a business.

Well, where do you find the money you need? Let me give you the bad news first. It's not where you thought.

Bank loans?

So many ways of raising the money for starting a business that were available just 2 or 3 years ago aren't now. A few years ago, it was common to get a loan for starting a business from your bank. Sorry, but that option isn't available today for most folks.

Banks aren't approving many loans to start businesses. Credit is hard to get. If you're one of the lucky or smart ones with a stellar credit history, you're probably not going to “rock your financial boat” with something risky like starting a business right now. Funding small businesses like what you have in mind isn't very appealing to them right now. Does that sound harsh? Get over it. It's a modern business fact. If you want to start a business now, you'd better figure out a way to work around your scarcity of capital.

In fact, I'm not even going to talk about bank loans right now. If you want to learn more about borrowing money for starting a business from a bank, go talk to the loan officer at your local bank. Let me know how it goes. (When the economy improves, I'll be really happy, & will update this section!)

Grants for starting a business?

You should also forget about getting a business grant. Those are myths now. Oh, grants do still exist, but not on an individual level. They're mostly ganded out business to business, or government to business. Grants have to be applied for, and must meet very specific demands. No one's standing at a table with a check, waiting for you.

Credit cards? Noooo!

The same thing goes for financing your business with credit cards. Those big credit card corporations are suffering now too... and aren't looking to get involved with start-ups. Besides, that's a way-too-risky way to get money for starting a business. If your business doesn't take off like you planned, or something goes wrong that's out of your control (like a recession!) you'll still be responsible for that debt. I learned this the hard way. Please, don't EVEN think about borrowing on your credit cards!

2nd mortgage or personal loan?

Borrowing against your house was common too. Second or even third mortgages were taken out during the real estate boom to finance business start-ups. Well, that money pool is dried up too.

This all sounds pretty bleak, doesn't it? What is left for the hungry entrepreneur without deep pockets?

Bootstrap your business

I think that the best way to find money for starting a business, is by starting a business that doesn't cost more than you have available. Don't you hate that kind of logic? But it's true. This is the era of the boot-strapper. If you don't have lots of money, you'll need to start small at first. Plan to grow your business gradually, over time. I'm not saying to not think big... just think smart. And do it now, while you're still planning your business.

The beauty of starting most home-based businesses is the low start-up cost. After all, there's no costly monthly lease or rent for your business space, no extra liability insurance, no separate utilities, less advertising, etc. Often a portion of the home expenses can be written off at tax time. (Don't quote me on this... the law changes all the time. Consult your accountant!) An at-home business should cost less to start and run.

Take an hard look at your finances. If you're past the brainstorming stage of starting a business, have you written your business plan yet? What's the least amount of money you can get started with? Some internet businesses can be done with only a computer and internet service. Yeah, I'm assuming you have electricity already... and a place to work. Depending on your business, you should be able to start working for under a couple of thousand dollars. Probably for much less.

The amount of money you need at first will depend on what kind of home-based business you set up. Some are more expensive to start than others. If you sell products (hard-goods) online, you'll need inventory and will have to pay for the costs of shipping the product you sell to the customer. A service business will need special tools and materials. Every business needs at least a little advertising to find customers. Figure out approximate costs for these necessary expenses.

Now, how could you raise that money for starting a business? Here's a few ideas.

  1. Take a temporary, part-time job. (If you can find one.)
  2. Could you sell something? Click here to learn how to plan a successful garage sale.
  3. Do you have any money stashed in a savings account that you could tap into without hurting the family budget?
  4. Could you borrow it from a family member or friend as a short-term loan? (with a written contract, of course!)
  5. How about "doing without" something for awhile? Drop the cable TV, no dinners out, maybe quit smoking, to save money?

Like I said, this is the era of the DIY bootstrapper. Today's entrepreneur has to be ready to roll up their sleeves and work hard. Money doesn't grow on trees anymore. But not borrowing money to start a business will a blessing in the end. The freedom from the weight of business debt later is worth your hard work now!

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