Resources - Chapter 10 Supplement

Identify Sources of Start-up Financing

Personal Savings

Be conservative in your spending so you can build a start-up nest egg.

Personal Loans

If you own your home, you could take out a second mortgage or an equity loan. Some people use their credit cards (not usually advisable due to high interest rates). Another option is to cash a retirement account.

Student Loans

If allowable, maximize the amount of your student loans and put the extra into savings.

Family & Friends Loans

Avoid potential discomfort and resentment by designing a loan contract that clearly delineates the terms and repayment schedule.

Private Investor Loans

Most private investors want to make a healthy return either in dollars or a percentage of the business. This route requires research, correspondence, proposals and a refined business plan.

Bank Loans

The amount loaned is usually based upon your assets, and banks require a complete business plan.

U.S. Small Business Adminstration (sba) Loans

The sba offers several types of funding from guaranteeing up to 85 percent of a commercial bank loan to directly loaning money.

Grants

Many organizations provide grants to people who fall within the parameters of special interest groups, either as the business owner or the market you plan to serve. At a minimum, this route requires research and proposals.

Partnerships

This affiliation can vary from a "silent" partner (more of an investor) to someone who works alongside you to build your business.

Community Development Corporation (cdc) Investors

Local organizations that partner with government, business owners and community leaders to provide economic assistance (e.g., loans, grants, consulting, subsidized office spare). This is usually geared toward specific populations or the enhancement of a particular area of the city.