Don’t Give Up If Your Start-up Business Can’t Tap Into Traditional Sources of Financing.

For most people who have ever had a dream of starting their own business, a lot rides on the finances involved. Having the money already in hand to make your business dream a reality is not the typical scenario. One must usually rely on someone else or some financial entity to hand over the capital.

Typically, there are two sources of traditional business financing most prospective small business owners turn to first. The most common type is debt financing. You borrow money and agree to pay it back within a certain time frame and with a set amount of interest. This kind of financing must be paid back whether your idea is a success or an absolute failure. The other traditional form of startup financing is equity financing. This involves selling a portion of your business or selling partnership to an investor. The investor may prefer a share in your business over simply repaying them with cash. If your business is a success, they will often see a better return for their money than what they would have gained back in interest payments. If the business fails, you the owner and the investor both lose the money put up as capital.

There are times and circumstances that lead potential business owners down other routes when it comes to financing their startup business. Some may find their ideas and potential profits are incredibly strong and viable but their credit with a traditional financial institution is less than stellar. Other means of financing are out there for the average startup business dreamer, it just takes a little creativity and research to tap into them.

One time honored method of finding cash flow is to simply tap into the capabilities of those around you who might already have faith in your business dream. Your family and friends can be a valuable source. They will be less critical of your past credit history and may be just as anxious to see your business succeed. Use caution when dealing with money from those you know. Be sure to draw up all the legal paperwork necessary as if they were a bank. This protects you and them down the line if the business fails or even if the business is an overwhelming success.

Another overlooked source which can give you a never ending stream of capital is the government. There are literally thousands of grants waiting out there for the right startup. Many grants are available to businesses which can support or work to improve existing government projects. If you are willing to locate your business in an underprivileged community or it will create jobs for minorities in the area, grant possibilities are there for the taking. Any business which can help revitalize an area, lead to regional development, lead to an increase in public transportation or increase child care needs and facilities in a given area, is able to tap into government grants.  You can find information on grant availability from several government agencies. A few of them are the U.S. Department of Agriculture, the Veterans Administration, Federal Housing Administration, and the U.S. Department of Energy.

Green Grants and sources of finance are becoming well known now. This fairly new trend in financing increases your chances of grant approval or loans if your startup business will use environmentally sound green technologies or utilize green fuels such as solar power or bio fuels. Using so-called green building materials will also increase the amount of grants and funding you qualify for.

Leasing out your startup is an alternative much like those who can not get a home loan will lease or rent a house instead. It is now possible to lease the big ticket items every startup needs to get production going. You can lease big ticket items like manufacturing equipment and vehicles. You can find suppliers who will lease your basic office and operating supplies, such as computers and copy machines. Leasing office space is a financially frugal option for your startup business.

While everyone knows the textbook picture of the venture capitalists that sweeps in and makes your business dreams come true, an angel investor is one step above. Angel investors seek out opportunities others seem to steer clear of. These individuals can spot high potential growth for startups and want in early. They may want a percentage of the company’s equity, up to 50% for some, or may charge a management fee. Some venture capitalists join together to form angel investor clubs. Some area Chamber of Commerce groups will host events for these clubs to meet potential startup entrepreneurs. If you reach out to local small business development centers or regional economic development agencies, they can usually put you in contact with angel investors.

With a little outreach, creativity, and research, the startup you wish to make reality can become one. Project your self confidence in your business dream to others, and the financial backing is sure to follow whether it comes from a traditional source or not.