How to finance your business

So you’re stuck at home or are on SSDI and you have a great business idea.  How does one find money on such a low income?  Here are the traditional ways entrepreneurs get financing.  For more information go to

http://entrepreneurs.about.com/od/financing/Financing_Funding.htm   The funding ideas are covered in greater detail there.

Friends and Family

The best way for us to finance a business when we don’t have any money is to turn to friends and family.  I know this from experience.  In financing my FaceBook app I had to turn to my parents and a few friends and acquaintances I have met along my way.  They are less forgiving of poor or no credit.  Their return on investment expectations are a lot less that venture capitalists.  Do not overlook this possibility

Credit Cards

This can be a dangerous approach to financing.  Approached irresponsibly it can have disastrous results.  NEVER use credit cards for long term financing.  Only use them for items that you can pay off quickly within 30-60 days.  Remember the first 30 days there are no finance charges so pay them off quickly.  Long term financing on credit cards can financially ruin you!

Equity Financing

This can help.  If you have a business idea consider getting a partner who will chip in some or all of the finances.  This is what I have done thus far in that regard.  My app needed programming.  I first looked to US companies but soon learned thte idea would be well out of reach.  Next I looked abroad.  I found a number of software companies who would write the program for 1/3 – ¼ the cost.  Then I asked a number of them if they would be my partner.  One said yes and agreed to write the program for half of what they quoted my.  Their URL is http://1000app.com meaning they charge typically $1,000 to write a Facebook application, though mine is far more extensive than the typical app.

Bank Loans and Angel Investors

There are two ways to look at these verities of financing.  One is cheap the other expensive.  Bank loans are the cheapest money, but the hardest to get.  You will pay a set amount of interest until the loan is paid off.  Best of all you will own 100% of the business.  Angel investors (which is what I am currently looking for) might be a little easier on evaluating your business, but they will want a percent of equity in your business.  The same with venture capitalists

SBA Loans

Finally there are Small Business Administration guaranteed loans and micro loans.  Check http://sba.gov  You are eligible for a guaranteed loan after you have been rejected by a bank.  The SBA will say to an affiliated bank, “Yes we will pay off the loan if my disabled friend (or anyone) defaults.”  This is an incentive for banks to give you money.  Micro loans are also SBA originated.  Honestly I don’t know a whole lot about these but info is readily available at the web site.  Or you can make an appointment with SBA representative.

That’s it for this week.  Next week I will cove franchises.

Remember to keep an eye out for my app coming online.  http://apps.facebook.com/jobgenie      

Tags: angel investors, finance a business, handicapped, SBA loans