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How to Get Money to Start a Business

Updated on June 15, 2012
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You have a great idea for a business and now need to find money to start it. This is not easy. Although it is rather simple to get a house or car loan, and while successful businesses can take out loans without much hassle, getting money for a start-up is rarely an easy task.

Before you start looking for money, it is important to have a strong business plan in place and know exactly how much money you will need to launch the business and operate it until it start making money for you. Too many entrepreneurs fail because they underestimate the amount of capital needed to make their business a success.


The Three F's of Funding: Family, Friends, and Fools

The best people to contact when starting a business are family, friends, and fools. Sometimes a person may be all three of these. The three F's are usually the people who will fund an idea even if it has a high potential to fail. While we hope your business venture is a notch above the rest, statistics state that it will not last longer than a year or two.

The main point here is that banks and venture capital firms will not provide money to someone who only has an idea. An idea is worth a couple of cents. Until financial institutions see a serious investment on the part of entrepreneur, with high odds of success, they will not be interested in financing the concept.

Fortunately, there are plenty of other ways to find money to start a business.


Entrepreneurship is Difficult

NOTE: The majority of entrepreneurs make less money than if they actually worked for someone else. An entrepreneur will often work 60+ hours a week with no guarantee of actually making money. Do not start a business thinking it is an easy way to get rich. Even the greatest ideas take a lot of time and energy.

Getting Money to Start a Business: The Steps

Although the financial struggles involved in starting a business can be overwhelming, by following the steps below, you may realize that financing your project is not nearly as difficult as you first anticipated.

1) Have a solid business plan with estimated costs: Having a game plan from start to success, along with knowing what costs will be anticipated, will help the entrepreneur understand the task at hand. Additionally, by showing potential investors the costs and expected results of the company, not only will they be more likely to invest, but the entrepreneur can be more assured that he/she is not going to lose the investors' money.

2) Consider implementing the business in stages: Do you need to have a storefront or can you start by selling online? Will a company vehicle be necessary or can your old pickup work? By starting with the minimum needed to begin making a profit, the business can pay for itself.

3) Barter services: Rather than paying for everything, are there some things that you can provide in exchange for services your business needs? Are you starting a restaurant? Perhaps the graphic designer who creates your website would enjoy receiving a free meal for a week. Consider trading your services and products to help your company get started.

4) Spend your own money: Are you going to put the necessary energy into making the business a success? If your desire is to spend other people's money just in case the business fails, then I doubt if others should invest in your idea. After all, if the founder is preparing for the business's failure from the start, why should other invest? Show your commitment to yourself and others by using your own money to launch the business.

5) Find those Family, Friends, and Fools: Family can be a great place to start, as they may be the most forgiving if a venture does not succeed. Friends and strangers are a bit riskier, although they may still be willing to help out a little. There are two important considerations before taking money from individuals: 1) Make sure that they know the risk involved and the relationships will not be destroyed if the business fails, 2) Only allow them to lend money that they could live without - you do not want to be responsible for sending someone to the poor house.

6) Look into peer lending sites: There are many websites such as prosper.com and lendingcircle.com that have been starting up. These sites allow for groups to lend money to individuals for specific projects. Rather than one person investing $10,000, one thousand people can each invest $10 - providing a safer environment for investors. Although these sites limit the kinds of projects they accept, it may be worth looking into.

7) Sell products/services in advance: You need to be very careful about offering to provide a service unless you are confident that you will be able to make it happen. However, if you know that you will be able to make good on your promises after receiving the necessary funds, consider pre-selling your product. This will get you the needed start-up capital and provide you with customers right away! Consider giving a discount or other benefits to anyone who is willing to work with you from the beginning.

8) Wait: If you do not have the money necessary to make a business a success and you are unable to convince people of it's value, then it may be a good idea to place the business on hold. You do not want to start something and have to stop before it is profitable. Consider working, saving money, and developing a stronger business plan to launch the company in the future.


Would you be willing to start your own business even if it meant earning less money than you currently make?

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Getting Venture Capital

Once a business is successfully operating, it may be necessary to acquire more funding for the next move. This is when an entrepreneur should start looking for venture capitalists. Venture capital is not easy to acquire as there are many great ideas constantly being thrown upon wealthy investors. However, by using services like gobignetwork.com, an entrepreneur may be able to find the needed capital to make the business a success.

But until the business is up and running, already making a profit, using these small methods for making money will be necessary.

Good luck as you continue to develop your business and please share with me any businesses that you have successfully launched - I would love to check them out!


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