Small Business Start-Up Financing

Some Well-Known Sources of Seed Capital for a New Business

Apr 25, 2009

Where can one go to get the start-up financing needed to get a new small business off the ground?

A previous article examined some relatively quick sources of small business start-up financing. This article takes a brief look at several, more traditional funding alternatives. Though these financing options come with many requirements and have a longer approval processes, they generally come with benefits, such as access to larger amounts of money and a formalized repayment process.

Government-Based Loans and Grants

There are several government-based financing programs available for starting up a new small business. This is definitely an area worth looking in to for the needed seed capital. Just keep in mind that when it comes to government grants (as opposed to loans) most of this money is directed at non-profit organizations or is limited to very specific sectors. Even if an entrepreneur is able to qualify for a grant, this money will probably come with a lot of restrictions on use as well as other requirements.

One can start searching for government-based loans and grants by checking out the following sites:

One should also contact the local Small Business Development Center to see which financial assistance programs they offer. Moreover, there are several, specific options for women and minorities.

Venture Capital and Angel Investment

Angel capital is equity capital from wealthy individuals and experienced entrepreneurs, while venture capital is also made up of private funds, but comes from institutional investors. Both forms of capital are generally offered to new companies with the potential for profitability and rapid growth in exchange for ownership shares and influence over company decisions. Angel investors, like venture capitalists, make their return on investment in the event of an Initial Public Offering or the trade sale of the funded companies.

For a list of angel investors, one can check out the Angel Capital Association; for a searchable directory of venture capitalists go to Vfinance.com.

Small Business Loans from Banks and Commercial Lenders

One of the most well-known forms of small business finance is the traditional small business loan provided by banks and commercial lenders. These loans generally come in two flavors: a secured loan that is back by collateral and an unsecured loan. Pursuing this financing option, however, may not be so successful. Banks and commercial lenders are generally reluctant to finance small business start-ups especially at a time when the economy is weak.

One can start a search in this area by calling local banks and asking them if they are funding small business start-ups at present. If the answer is yes, then one can request a list of requirements for approval.

Equipment leasing

By leasing equipment, instead of purchasing it, a new business owner can reduce the amount of capital needed to get a small business up and running. Another added benefit is that equipment leasing helps small business owners avoid purchasing equipment that will soon become obsolete or inadequate. There are several equipment financing options available to small businesses, so be sure to do a little research before making a decision.

The copyright of the article Small Business Start-Up Financing in Business Resources is owned by Susan Brown. Permission to republish Small Business Start-Up Financing in print or online must be granted by the author in writing.