Small Business Startup Funding

Banks

Banks in particular have made tremendous cutbacks, and investing in small business is first in the cutbacks line for many banks. Small, local banks are tightening their purse strings as well as large banks, but some are still lending. Their profit margins are better than large banks. But for the most part, fewer and fewer business loans are being made or increased.

Other Investors

The story is the same for the rest of the group: associates, family, neighbors, customers, friends who would typically consider investing in small business.

So where do you go from here? Today, there are fewer options, but options nonetheless.

Internet Investors

A new method of procuring investors is via the Internet. There are sites offering loan or investment opportunities to businesses via email contact. It is important to note that great caution should be taken and only reputable sites contacted in this option, as there are many Internet predators. Check with the Better Business Bureau and other organizations to ensure the company you contact is legitimate.

There are companies offering just investment, just banking, or both. With either, the business owner sends the company information such as the business plan, and reasons for requesting a loan or investment opportunity. The company reviews the information and contacts the requester with a denial or approval. Again ensure the company has integrity, as you are sharing personal financial information, account numbers, and so forth.

Information to Provide

Whether seeking traditional or Internet financing, the following should be kept in mind:

Keep the initial presentation short but appealing, including just the necessary information.

Videos, photos, graphs and pie charts should be included where available.

Include information on the form of business (sole proprietorship, corporation, limited liability corporation).

Briefly discuss your target market.

Briefly outline your marketing and sales strategy.

Include a short management summary with information on the key players.

Include information on the business’ worth or expected worth. Show one year’s profit and loss statement if available.

Identify exactly how much money is requested, and why.

Angel Investors

Angel investors, or venture capitalists, are those who have an interest in a particular type of company and have the funds to invest. They invest small amounts, typically between $25,000 and $100,000, and small businesses have a special appeal to them for this reason. Angel investors can be located through networking, through conversations with neighbors, family, friends, and co-workers, or via organizations such as the Service Corps of Retired Executives (SCORE) and the Small Business Association (SBA). Some areas have small business start-up assistance programs through public funding or universities. Contacts in these programs may know of persons interested in investing as “angels”.

Angels typically anticipate at least a 25% return on their investments, fund three out of every ten proposals sent their way, and are usually found within one hour’s distance of the business location. Angels are typically middle aged people who earn a yearly salary in the 100,000 range, have a net worth of about $600,000 to $800,000, and are accustomed to investing about $35,000 to $40,000 annually.

Small Business Administration (SBA)

The SBA is a government program that offers loan opportunities to small businesses and might be worth contacting.

Small Business Library