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Start-up Capital Options With High Potential for Growth

Start-up Capital Options With High Potential for Growth post image
Business start-up capital provides people the opportunity to transform their ideas into workable concepts. This has many benefits including the creation of jobs and running profitable business ventures. Entrepreneurs seeking start-up capital should demonstrate experience, show the need for their business ideas in the marketplace and show sound financial discipline to assure potential investors that their capital will yield returns.

Research
Research the business or its industry before starting it. Read various books and trade journals that provide information about the business or the industry. Schedule appointments with successful entrepreneurs who have succeeded in the same and seek advice on how they obtained financing for their businesses. Do not spend so much time finding information about the business. However, it is important to have some basic knowledge about the business.

Personal Financial Resources
This should be the first place to look for start-up capital. It may involve applying for an equity line of credit using an asset as collateral, reviewing credit card balances or scheduling an appointment with a financial planner to discuss the options available with money from retirement plans, stocks or mutual funds.

Schedule an appointment with a mortgage holder to discuss interest rates and terms of repayment. Use some of the money obtained through personal financing to persuade potential investors that the business idea is worth pursuing.

It is always a good idea to fund a start-up using personal financing. Once the business is launched and starts yielding profits, it will have more value to potential investors because it is a proven business concept. Potential businesspeople with no money can seek financial assistance from friends and family.

Banks and Financial Institutions
Some sources of start-up funds include credit cards, SBA and equity loans. Many banks require collateral to guarantee a loan. Businesses that are already in operation can obtain more financing using their assets as collateral. Individuals can also obtain financing by borrowing against investments like investment securities, real estate, vehicles, arts and stock portfolios among others.

Angel Investors
These investors have attained certain financial and professional experience. Many angel investors belong to investment groups, which advice businesspeople on how to create business plans and present them in ways that investors would appreciate. Not all companies that obtain advice from angel investors obtain financing, but the application process provides useful training for potential entrepreneurs.

The Business Plan
Choose a business plan that guarantees immediate profits. For instance, instead of buying relevant equipment immediately, obtain equipment finance for the business while putting all the effort into building a customer base. In addition, hire contractors on temporary terms to undertake certain tasks instead of hiring permanent employees. Equipment finance and outsourcing can help the business make substantial savings on social security and Medicare taxes.

Apply for business loans or other forms of outside investment once the business proves that it is a profitable venture. The period between starting a business to realizing profits varies depending on various factors. Some may take months while others may take years to realize profits. In any case, investors are likely to provide business financing if entrepreneurs can provide proof that their businesses are profitable ventures.

About the author: Sally Smith is a freelance writer. She has been up to date on financial and business books.

Comments on this entry are closed.

  • Nivlac

    I particular like the phrase “angel investors”, they are quite hard to find and at time they prefer to buy your idea and increase their wealth than to sit and build your small business.
    Personal Financial Resources, that’s always a plus for me , but i am not always able to come up with the cash flow needed to get thing up and running.

    The banks in my country operate like a den of thieves , they impose high interest rates and then blame it on the economy.

    In the end you have to believe in your dream and make the necessary
    sacrifices.

    Have a blessed day.

    • Thanks Nivlac, what country are you in? I’d say in most places the populous would say that their banks are like a den of thieves ha-ha.

      • Nivlac

        I am from the cool tropical Island of Jamaica, located in the west indies.

  • oivas

    The article brings out the facts so beautifully, in fact, I cannot agree more on the Business Plan.

    In my personal opinion business plan would rate ahead of the other points, simply because it not only shows the direction to potential investors or banks, but also to ourselves. We know exactly what we are getting into and what contingency plans we need to have in place. If banks refuse us loans, then what steps do we take to start or for that matter, stay afloat. All these points would be covered in the business plan.

    All said and done, the article does bring out all the essential aspects of a business. Thanks!

    • Sally Smith

      If you’re refused by the bank, and you’re a dedicated entrepreneur, then you can:

      *Borrow from family and friends (presuming they believe in your idea).
      *Max out your credit card/s (How much do YOU believe in your idea).
      *Find a VC/Angel Investor (Remember, they only usually invest if they’re going to get more than their money back, what are you giving up in the process?).

  • Phyllis Moore

    I agree that start-up capital is essential for business owners starting out, but so is the business plan.

    It has to start with a formal business plan otherwise what business owners have is an idea and enthusiasm. The researching of the marketplace, as you mentioned, is essential. From there, I think that business owners must determine not just what they can offer but how they will reach their prospective customers. They need to have a good breakdown of the financials that will help them achieve those goals.

    A well-thought out and workable business plan, in turn, will attract the interest, and hopefully the funding from investors.

    • Sally Smith

      Well, my answer would be, you need it ALL.

      You need the business plan, the capital, the connections. All of this requires only one thing: time. How much of your are you willing to give up?

      Of course, if there’s any value in your idea, you will be able to delegate in the future, but assuming you’re willing to work on your idea for 4+ hours a day after your regular 9-5, the business plan, the capital and the connections are all a piece of cake.

  • Scottf14

    I agree with your assessment of potential high-growth potential start up capital options. I think that a business plan should come before the personal financing portion, but I suppose that might make me sound odd. Ha, seriously though finding money to start a new enterprise can be difficult.

    People like to invest in individuals who have money already as opposed to the poor guy with a million dollar idea. This does not mean that an individual who isn’t swimming in money won’t be able to borrow any. It just means that they have to at least seem like they are capable of coming up with money even if that particular investor does not offer to lend any.

    • oivas

      Hello Scottf14

      I have actually witnessed both sides of the coin, that is financial institutions not investing because they have worry on the ability of the person to pay back, while on the other end institution paying just because the business plan sounds so realistic.

      So, it may not be always person dependent but also plan dependent. But thanks for bring out this point.

      Thanks!

    • Sally Smith

      If you have the idea, and you can show some sort of projection as to how it’s going to directly translate into $$$, then i assure you, people will be willing to invest.

      This assumes you’ve put the hard work into showing how it’s going to provide cash value.

      Trust me, VC’s/Angel investors don’t like to do work, and they’re looking for ways that they can get a better return on their money than the bank’s interest rate. If you’re willing to do all the heavy lifting, while they tend to all of their other interests, they’ll give you the cash.

  • hannahyuga

    This is a good share. Hopefully you can write more in the future about what business could really yield relatively high profit with less investment. I believe the hardest part is the market research.

    • Phyllis Moore

      @hannahyuga, yes, I think so, too. Those are great topics for more exploration. They are so crucial for success!

      You’re right about market research, I think. Entrepreneurs may have ideas and passion for the ideas but then it is time to pose the important questions. Who is the target market? Are they interested in the products and or services? How do you reach them? Who is your competition and what do you have to do to be successful in light of such competition?

      I like the market research suggestions in the article. Getting in touch with entrepreneurs in the field is a particularly good one. Finding a mentor is ideal. I think it’s so important it is to get solid and trusted advice and counsel.

  • I enjoyed your article but want to caution anyone thinking of starting a business on credit (i.e., home equity loans or credit cards) NOT TO DO SO with a caveat of course. If you are starting a business it’s important that you really understand the industry which means you should have been working in it for years with someone else as your boss. When and if you’re ready to make the jump to your own business you will have cultivated the contacts and insider knowledge necessary to do so.

    • Phyllis Moore

      @sfimirat, those are some really good points. Having insider knowledge and contacts is so important. It can be extremely helpful for the entrepreneur who is just starting out. There may possibly be advantages from a funding perspective, as well.

      In general, I think it’s best not to go it alone, and if you’ve got those kind of connections, you will have more opportunity that someone entering the field armed with research and enthusiasm and little else. Having that kind of experience in the business without yet being the business owner yourself is a great proving ground. Also, as you would have a chance over time to test out your commitment and long-term passion for the business you intend to embark upon.

  • Danna Brown

    I feel the best investors would be to see if you could obtain money through personal resources also. It’s just hard sometimes to convince family members to believe in the potential success of your idea.. I like the idea of also considering the use of certain stored funds , such as retirement.

    This article also made me want to revise my business plan. I never though of the business plan being a sales tool also. I was personally using it as just a blueprint for a great idea.