When you’ve created a grand idea for a small business in Los Angeles California or elsewhere, you don’t want to be limited by how much money you have starting out. Luckily, there are plenty of opportunities to get funding for your company if you know where to look.
Grants and Loans as Ways to Fund Your Small Business Start-up
Grants are possibly one of the best ways to get started because they’re basically loans that you don’t have to pay back. However, grants are only given out to certain companies and have many different stringent policies that determine if you’re eligible. A lot of it depends on where your business is starting up and what your business is doing.
Some places will give you a grant if you are starting up a renewable energy company, because people don’t mind trying to help those types of businesses. Some areas need to expand their tourism industry, so if you’re in the tourism industry you might get a grant. The last grant you can receive is for a child care center and it all depends on where you are. To get the grant, you will probably have to match the grant with a loan or with other funds. It varies depending on which business and who is giving you the grant. Grants are usually for start up business development or small business growth and are extremely competitive.
Loans are another great way to get some startup capital. Take out as small of a loan as possible, and try to get as low of an interest rate as possible so that you’ll eventually break even with your revenue. A lot of the time it’s hard for a start up business to get a loan as banks usually don’t want to invest in something risky.
However, the SBA, or the Small Business Association can help get you a loan with a bank. The way this works is that banks usually will not loan money without some type of collateral. Since small businesses usually don’t own buildings or other assets they usually have no collateral to use. Sometimes a small business will have to use personal assets as collateral, which is extremely risky because you run the risk of losing your house. The SBA will agree to cover 75% of the loss, which will help reduce the risk that the bank is taking in giving you the loan which will help you get that loan. It’s important to note that the SBA won’t lend you any money themselves, so it’s still possible you won’t be able to get the loan. Another way to space yourself away from the company and negate the risk of losing your house if the company fails is to incorporate your small business.
The Many Sources of Equity Financing for Your Small Business Development
Equity financing is still a very popular way of finding funding for a company. Several business developments will look towards friends and family members as a source of funding, but sometimes that can be a difficult move. If your business fails it can sometimes ruin relationships so make sure to weigh how important those relationships are to you compared to how sure you are your company will do well. That being said, these types of funding are usually very convenient and don’t require many contractual strings.
Equity financing doesn’t only come from your family though, but finding an investor is hard to do. There are several ‘angel’ investors out there who invest in start up companies and small businesses. They’re called angels because they are generally very patient and friendly towards their investments. They also have been known to give business training and tips towards their investments and help them out in general. They can be pretty hard to find though, so don’t hold your breath.
Venture Capitalists are a lot more common than ‘angel’ investors, but they usually don’t deal with start ups. If you’re a little bit further along and have a good track record, finding a venture capitalist is a good idea to expand your business growth. The problem with them is that they have pretty high standards and scaling small businesses usually face problems with handling their business growth. The thing with this is that you’re going to have to share control, and you might be selling your company in 3-5 years so be prepared for that. If you get involved with a venture capitalist, you are probably going to see your business development incorporated and learn more about incorporating before you pursue funding from venture capitalists: http://www.incorporationattorney.com
Funding shouldn’t come from a single source, and if you can combine a fair number of these funding sources you should be doing pretty well. And remember that you aren’t required to give up control of your company if you don’t want to, just remember that without an investor’s help you probably won’t experience business growth as quickly.