Finding Your Startup Funding

Starting a business means a need for money to help pay for a variety of things from registration fees to getting the store ready for customers to buying initial inventory.

Potential business owners often struggle to find those first dollars.

Asking for help to find grants, or ‘free money,’ is a common request. While there may be some small grants, these are not common and the bottom line is that the business owner needs to have funds available to invest in his or her business idea.

So how does the business owner get the cash he or she needs?

Bootstrapping a business startup, or using some simple means to finance the business, is common. People might rent or lease or barter. They make-do or go without. Owners are always looking for ways to get something at reduced price or free.

Successful business owners offer the following ideas:

Use personal savings. If the perspective business owner does not have any savings, he or she may need to first save enough money to cover some or all of the startup costs..
Maintain some cash flow by continuing to work at your existing job while starting your business at night and on weekends. During that time, you also can focus on building a savings account. In addition, staying in your current job means you’ll keep your health insurance benefits, giving you a feeling of security.
Do consulting working while working on opening your business.
Have family members in the work force. This means discussing your idea of being an entrepreneur with your family and making sure your family understands and supports your business idea.
Home equity or cash from a retirement plan are possible funding sources. However, you must understand the risks. If the business fails, you may lose your home or have little or no savings to provide retirement income when you want to quit working.
Turn to family and friends for startup funding. The cautionary note with this method is to make sure you put all agreements in writing. You do not want misunderstandings to cause a problem in the future.
Use credit cards. However, you should do this cautiously for two reasons. The first is that you may need those funds to help you through the initial period when your business generates little income. Also, you are putting your credit history at risk, and you may need good credit for a future business or personal loan.

Remember that usually the first dollars into your business are yours. At the startup stage, angel investors are hard to find. And getting a banker or investor is also difficult and the cost of their money can be high. If a banker does decide to give you a loan, they will probably ask for a personal guarantee and may want your house or other personal financial assets as collateral.

So build some savings. Get your credit score in good shape. And be prepared to be creative in funding your business.

About the Author
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About Glenn Muske

Glenn Muske is an independent expert on rural small business, working as GM Consulting – Your partner in achieving small business success. He provides consulting, and writes articles for county extension agents and newspapers across North Dakota. Previously, he was the Rural and Agribusiness Enterprise Development Specialist at the North Dakota State University Extension Service – Center for Community Vitality.