Contrary to the usual belief, in order for one business to be seen and heard by an investor, a business plan should be presented. However, financers do not actually invest on a business plan... it is only a document. A piece of paper. Nobody invests on that.

 

If you are a startup business or a budding entrepreneur who is currently looking for financial support to fund your business ideas, products and concepts, always remember that the process of looking for money must match the needs of the company. Where you look for money, and how you look for money, depends on your company and the kind of money you need. There is a big difference.

 

Below are the different types of lending which are currently available.

 

1. Venture capital

Venture capital if most of the time misunderstood. Most startup businesses fail to get the approval of Venture Capital. More so, people call them "sharks" because they are seen as predators of the business world.

 

This should not be the case. Like startups, Venture Capital is just a business. They are capitalists; business people who are charged with investing other people's money through businesses that they think deserve the money. It is their responsibility to actually know if the startup business will do great in the industry. They have the professional responsibility and risks to take. Hence, they do not agree on each and every deal that is being given to them.

 

2. The so-called Business "Angels"

Venture Capital is not the only most known funding source for startup businesses and small businesses. Several companies are being financed by smaller investors or what we call "private placements".

 

For instance; there are wealthy individuals who are sometimes looking for new investments and opportunities where they can grow their money. In the startup world, they are sometimes being offered with deals, and they are called the "angels". More so, many entrepreneurs know who their angels are. Most of the time, they are their friends, collegues or family members.

 

3. Commercial Lenders

These commercial lenders are often banks and big financing institutions who are offering financial assistance or loans to startup businesses. They are, however, the most likely source of financing for most small businesses.

 

On the other hand, banks are really not into funding businesses since it is a risky process. Federal regulators want banks to keep money safe, in very conservative loans backed by solid collateral. Startup businesses are not safe enough for bank regulators and they don’t have enough collateral. However, they do study businesses which they think are worthy of the investment. Also, financing thru banks often occur high interest rates.

 

4. The Small Business Administration or SBA

SBA do offer loans for small businesses and startups. The process works hand in hand with local banks. You normally will deal with a local bank throughout the process.

 

For startup businesses who are looking for finances, SBA normally requires that at least one third of the capital be supplied personally by the business owner. More so, the rest of the needed capital be guaranteed with collateral such as personal assets of the borrower.

 

Since SBA works with “certified lenders,” which are banks. It takes a certified lender as little as one week to get approval from the SBA. If your own bank isn’t a certified lender, you should ask your banker to recommend a local bank that is.

 

5. Friends, Relatives and Family Funding

This is the easiest of all the funding sources mentioned. If you have friends, relatives or family members who are wealthy enough to cover your neede capital, you can arrange a deal with them, including their options... eg: interest rates, what will be their benefits, how long will you be able to return the full amount, and others.

 

Try to submit to them your plan, and explain to them how your business will work. Let them take the time to study the advatages, risks and disadvantages. most especially if they too, need to study the market, the products that you will offer or the services involved in your business.