Home Business Financing
Staring a home business not only involves great
planning and feasibility studies but also good source of capital
investment and knowledge of financial management to maximize profit.
Do you have a great idea for a business but no money
to start out with? You have many financing options for your small
business. Here are some resources for you to consider when looking for
start-up money for your home business.
- Loans from friends or
relatives
- Private stock issue
- Forming partnerships
-
Angel Investors
- SME finance, including Collateral based lending
and Venture capital, given sufficiently sound business venture plans.
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Getting a Business Loan Getting a business loan seems like a daunting task
for many small business owners but with good preparation and research, a
solid business plan, and the ability to convince a skeptical loan
officer that your business will be a resounding success, you should have
no trouble getting a business loan. |
Raising Money Online
At
some point, you might need some financing, and you’ll want the best
terms you can get. Small home-based businesses, especially fresh
start-ups, typically have little margin for error.
On the plus side, you’ve got more options than
you can count, thanks to the myriad of lending institutions and
investors that are so easy to find and check out on the internet. In
fact, the ‘Net not only makes the capital hunt more convenient than ever
before, but has even stimulated an explosive growth in the amount and
variety of capital, worldwide!
This doesn’t mean you should ignore your local
lenders. There are certainly advantages of dealing with lenders in
person, especially when you are already known to each other. But it
would be unwise to ignore the advantages that online research can offer,
even in dealing with local lenders. Armed with facts and figures about
other lending options, you’ll be in a stronger bargaining position when
you approach a lender to negotiate a loan or line of credit.
The potential downside is that there’s so much
on the web, you can fall into a virtual black hole! Sifting through so
many options can be tedious, time-consuming, and sometimes even
fruitless unless you know what to expect, where to begin, and how to use
this amazing resource.
Most
important is to understand that the Web’s primary value is as an
instrument of research, not as a broker in a box. Yes, you can make
direct contacts through it and even close deals. But its primary value
is as a mechanism for gathering quick and comprehensive data that can
(1) increase your chances of finding capital and (2) improve the terms
under which you get it.
The Ideal Starting Point:
The best place to start your search for
funding is the Small Business Administration’s (SBA) web site at
www.sba.gov. Here you’ll find lots of free information,
access to counselors, small business loan options, and references to
information sources.
The SBA also offers its own financing
packages, such as its premier 7(a) Loan Guaranty which helps qualifying
entrepreneurs obtain loans on reasonable terms. Detailed information on
financing can be found at www.sba.gov/financing.
Banks and Clearing Houses:
Not surprisingly, there is no shortage
of banks and lending institutions online.
Most offer generous amounts of information
and even convenient options for transacting business via the Web. But not all of these institutions are
geared to the small entrepreneur. Many, moreover, offer terms and
conditions that vary widely.
You might start at sites such as ebank.com
— though this is by no means your only option. For more comprehensive information, do an online search under “Banks,”
then continue to refine your search by geography, or type of service. A
more select way to research banks and lenders is through online
clearinghouses, such as:
These represent only a few examples. Search far
and wide before making your decision.
Venture Capital:
Lending institutions
aren’t your only source of hope. There’s also a burgeoning number of
private investors called “venture capitalists” and “investment angels”
that can be found online.
Venture capitalists are individuals or firms that
typically invest $250,000 or more in fast-growth companies. They might
also claim a share of the stock. “Business angels” are private investors
who are willing to operate on a smaller and simpler scale. They are so
named for their potential to be a lender of last resort for struggling
firms looking for just the right terms.
These investors are harder to find than their
institutional counterparts. That’s because they prefer to pick and
choose opportunities to their liking, rather than be overwhelmed by a
world of pesky dreamers.
Luckily, the Web
has made it easier for small companies to at least make themselves
known to private investors through a variety of sites that are havens
for such programs.
