How to Get Money for Your Start-Up Business

Getting money for your start-up business involves exploring several options, including your personal resources and outside sources.

1. Review your cash on hand. How much money do you have in your account? That account may be for your checking or savings, but can include other accounts such as your retirement, vacation and holiday funds. First, determine how much start-up money you need and, second, look at your own personal funds before exploring your other options. Keep in mind that borrowing from your 401(k) has some drawbacks including potential tax penalties and a loss of opportunity.

2. Consider your home. If you have owned your home for many years, you may have built up considerable equity that would allow you to tap those funds to cover your business start-up costs. Keep in mind that the equity in your home has to be repaid. If your business goes under, you’ll still need to pay back what you borrowed.

3. Approach family and friends. Ah, the temptation to go to your family or close friends and ask for help to launch your business! Simply because these people know you and perhaps all TOO well, you still need to make a case for your business. The SBA advises that you perform “…due diligence before presenting your idea and asking for money,” and write up a business plan to show what people are investing in.

4. Talk with your banker. You may have already considered talking with your banker about a home equity loan, but why not ask for a business loan or a line of credit? Your banker may be receptive to your business idea — which is why you need to have a business plan — and loan you enough money to get started. Expect to put up so collateral, perhaps that restored classic car in your garage, a stamp collection or some other asset of value.

5. Explore peer-to-peer lending. People you don’t know may be eager to lend you money. You may be able to put together a loan through a peer-to-peer lending company, one that acts a broker between multiple lenders and you. Prosper and Lending Club are the two largest, offering entrepreneurs an effective way to get into the game through various lending schemes.

Get Funded

You may find that you can put together an assortment of lending options from our list to launch your enterprise. Borrow only the amount of money you need and come up with a repayment plan that won’t drain your business. If you are turned down for credit early on, apply again once your business has been established. Getting money for your start-up business may take some creativity, but once you have cash in hand you are well on your way down the road to success.

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