No Reason for Failure: How to Get Funding to Start a Business

The highs and lows of business funding

starting up a small business

According to numerous reports put out by the U.S. Small Business Administration, the number one reason for the failure of most small businesses is a lack of funding. This includes not only in starting a business, but in making it continue and grow. If you are reading this, chances are good that you are finding yourself in this situation. That's a good thing since this will probably save your business future.

Probably everyone who has been in business for themselves knows the highs and lows of business funding. It's a rough roller coaster to be sure, but unknown to most people, it's a ride that can be effectively tamed. All it takes is some thought and an exploration of your resources. Here are five that definitely deserve your consideration:

1. Bootstrapping. This is usually the first financing resource of a business. This is when the owner provides the initial funds to start his or her business. Perhaps the owner uses funds from his savings account, a designated tax return, or some other earnings. Regardless, when wisely deployed, these funds can be instrumental in starting a business and seeing it through its beginning times.

2. Friends and family. Whether you are using other resources or not, friends and family are often another excellent choice when attempting to fund a business. It doesn't matter if you have funding or are looking for additional funds, many business owners get some of their first--and best--funds from friends and family.

Many owners are hesitant to consider this resource since they are concerned that these funds can be lost, which should be a consideration, but at the same time, who is to say that the business won't be enormously successful, bringing great credit to the owner in the process.

3. Crowdfunding. Taking the idea of getting funds from family and friends up a notch is the newfound phenomenon of crowdfunding.

Probably everyone has heard of it, but what it is is gathering a small group of investors--whether you can qualify for a loan or not--and everyone contributing an amount to start a business. In recent years, and thanks to the Internet, websites have been developed around this concept with enormous success in a great number of cases. But this is only the tip of the iceberg. Even better yet, you can get started with this immediately. You should understand that within a short period of time in the future, the SEC is coming out with new guidelines governing crowdfunding, but it's still worth consideration.

4. Angel Investors. Angel investors are normally considered a good option after a business has been started and owners are looking for funds to take their business to the next level, but this is still a good source of funding. Angel investors are usually found in a wide variety of places--including the Internet--but there are everywhere. In most cases, angel investors will meet with their prospects to determine whether they meet their requirements, and if so they will meet again to gather more data. The net result, however, can be extremely rewarding, with infusions of capital from $50,000 to $500,000 or more.

 

5. Bank loans/Venture Capital. However far along the line a business might find itself, another source of funding are bank loans and/or venture capital. These resources are often considered the last resort for startup funding, but they are an important consideration regardless. In most cases, these funds are usually obtained only by firms in the later stages of their growth and that might need additional funding for operating capital or special projects, but they could be used for virtually any use. 

For businesses that find themselves in times of hyper-growth, venture capital funds are usually the best option. These include businesses that might be looking for tens of millions of dollars to expand into a new market and could garner a good return for a limited investor.

Keeping these options in mind while developing your business plan can make you an excellent candidate for taking advantage of these options.

If you are successful in obtaining these business funds, you'll significantly improve your chances for success, whatever stage of business you are in.