How to Get the Start-Up Capital for New Business


In a recent college survey, stu­dents listed owning their own business as their top career choice. It won out over becoming a doctor, lawyer, and even President of the United States. One out of every three people working in America today want someday to own a business, yet many people never do. Why not? Here are three fundamental reasons:

1. Fear of failure.

2. Ignorance of the process.

3. Lack of capital (and the belief that such capital is impos­sible to get).

If you are taking the time to read this article, you have the most important quality needed to start your own business: desire. Combine that desire with ambition, drive, and the self-discipline to follow your business plan, and you’ll be on your way to suc­cess. These qualities are far more important than the temporary advantage of having plenty of money. It is not the amount of money you start with that will determine your success, but the amount of ambition and determination you have.

Many of the most successful businesses in America were started by people who had very little money. They simply invested their time and hard work and stayed with their plans for months and years.

By this point you may have completed most of your planning. You know what you will sell and to whom. Based on your busi­ness plan, you may have determined your marketing strategy (how to reach your customers) and how much you must sell each month to break even. Now you must determine where your start-up capital will come from.

Your business might grow more slowly if you have limited capi­tal, but, in fact, this limitation offers several advantages. For example, if you don’t have a lot of money, you will learn more quickly to become a creative thinker in your marketing and business decisions. Also, without a lot of money, you will learn how to maintain a tight budget for your company.

Where do you get the money you need to get started? A good place to start is by looking into your own resources, such as your savings and personal assets. Make a list of everything you own that could be sold, such as furniture, jewelry, savings bonds, life insurance, or any other personal assets, and then decide which are worth giving up to start and build your own business. If you own a house or a car, you can sell it or borrow against it to raise the money you need.

Credit cards are another good source of capital. Many credit cards provide credit lines as high as $10,000 to $20,000 or more. You can also obtain cash advances on your credit cards.

Personal loans from a bank are another way to obtain the money you need. If your credit is not strong enough, the bank may require a cosigner. This can be a good way to build your credit rating, for you can borrow as much money as the bank is willing to give you or as much as you feel you can pay back within six to twelve months, you can then borrow again and pay that money back quickly. Just be sure to make all your sched­uled payments on time. This is a good idea even while your business is in the planning stages. Having a strong credit rat­ing is vital to you and to your business.

Another good source of funds is borrowing from immediate family members and other close relatives and friends. Think back during the planning stages of your business and make a list of all the people went to for advice or to discuss your ideas. Often people who helped you plan your business will be inter­ested enough to invest money to help start it.

Personal savings and borrowing money from family and friends are the number one ways in which new businesses are started in the United States today. When you borrow from family or friends, you don’t need a successful business track record or assets to pledge as security for the loan. But when a friend agrees to lend you money in return for part ownership in your company, only give him or her a small or minority amount of stock. Remember: You are starting your own business so that you, not someone else, can control your own destiny.

Another source of money is business loans from your banker or local financial institution. These loans are usually dependent on your credit history, collateral, or previous record in business. Such loans almost always require you to give a personal guar­antee. The bank will also look closely at how much of your own money you are investing. People who start their own businesses are risk-takers, but bankers are not. As a result, you have to convince the bank that there is little or no risk in lending you the money you need for your business. It is therefore important that you develop a relationship with at least one or two bank­ers. Seek out their advice and include them in much of your planning so that they get to know you and your business. Make sure you are comfortable with your banker. A close, personal relationship with your banker can go a long way in helping you get the money you need.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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