Every entrepreneur needs cash to start or grow a business. So where does it come from? Here are 10 of the best places to look:
1. Harvest Your Hidden Savings
You may have more savings than you think. Do you own stocks or bonds? Do you have a regular or ROTH IRA savings account? How about Life Insurance? Every one of these assets can be a source of funds, either by cashing them in, or by borrowing against them. In some cases – like a Universal Life Insurance policy – you can actually borrow FROM YOURSELF, which has multiple benefits.
2. Mine Your Hidden Equity
So many entrepreneurs borrow against the equity in their homes (e.g.: take out a second mortgage) that it’s almost a rite of passage. But did you know that you can borrow against the value of your car, boat, and motorcycle?
3. The eBay Way
Speaking of hidden assets… how much junk is lying around the house that you could turn into cash? I made almost $1,000 this week just by selling things I found packed away in my attic. Don’t like eBay? Have a garage sale.
4. Friends and Family (and Fools)
Lots of businesses get started with cash infusions from mom, dad, Uncle Lou or the guy next door. Don’t be afraid to share your enthusiasm with these people. But don’t borrow money from them either. If they can afford to INVEST their money into your business, make them official stockholders. Take the time to do it right or you’ll end up with more enemies than friends.
5. Angels Are All Around You
Wealthy individuals who put some of their money into young businesses are called Angel investors. You may already know several people who can and do invest in small businesses. Put the word out that you are looking for angel capital. Start with your CPA or lawyer – they often know of angels and can get you an introduction. One key for success is to find someone who shares an interest in your industry or market.
6. The Big Bad Bank
The bank never makes it to the top of my list, but perhaps it should. If your credit is good, you’ll have no problem finding a bank to lend you $10,000 or $15,000 when you start a new business. If your credit is not so good, be sure to ask about a Small Business Association (SBA) guaranteed loan. You’ll need a complete business plan and a bit of patience, but you’ll benefit from lots of community support along the way.
7. Calling All Credit Cards
Somebody had to say it. Using credit card debt to start or grow a business is a terrible way to manage your money… but it can be done. Beware the down side. If your business fails and you’re left with $50,000 in credit card debt, you’ll wish you’d tried a different route first.
8. Pandering To Professional Investors
Venture Capitalists (VC), Private Equity Groups (PEG) and Corporate Finance Companies are all excellent sources of growth money. But this is the big leagues, finding VC dollars is not like applying for a credit card. Do your research; search for financiers that invest in your industry, and in your stage of growth. Don’t even bother to call a group that invests in nano-technology unless you are a nano- technologist!
9. Be Prepared
No matter where you’re looking for cash, you should ALWAYS have a complete, concise, and compelling business plan. On paper. In writing. With budgets and forecasts and marketing plans and… you get the idea. There is NO substitute for the research and thinking that goes into a business plan. And no serious lender or investor will pony up cash without first reading your plan.
10. Get Professional Help
If you’re having difficulty planning, forecasting, or making contact with the right kind of investor, seek help. There are all kinds of brokers, agents, and bankers here to help you. Many of the best are independent consultants who make it their business to know where the money is. For larger, more complex transactions, seek out an investment bank or securities broker. Ask for help… you’ll be amazed at how many resources your local community has to help people just like you!
About the Guest Author
David Worrell is an accomplished entrepreneur, author of the e-book Finding Funding, and writer for Entrepreneur Magazine. A business consultant, David specializes in helping emerging companies solve tough financial and strategic issues.
