The Right Funding for Your Business Type 19

Venture capital
Venture capital firms want repeat entrepreneurs. They want plans with huge growth rates, in high-growth industries — usually high tech as well as high growth. They want excellent management teams with proven track records. And they want plans needing multiple millions of dollars, generally $4-5 million and up. There are only a few hundred true venture capital firms in the United States, probably half of them located on Sand Hill Drive in Menlo Park, CA. They invest in new businesses in exchange for substantial ownership, generally more than 50%.

Angel investors
This group includes thousands of individual investors, investment clubs, local investment groups, and others. They are hard to categorize and hard to describe as a group. Angel investors act a lot like venture capitalists in their dependence on business plans and management teams to evaluate businesses, and they also like high growth and high return, but they are more likely to invest smaller amounts. Angel investors will also sometimes accept less ownership than venture capitalists, in some cases as little as 5-10%. However, there are no simple guidelines or standards on this; everything depends on the specific case.

Commercial bank loans
Banks loan businesses money for working capital and even occasionally for expansion, but not without solid collateral. Banks don’t generally invest in new businesses or new business plans, for good reasons. The government doesn’t want banks taking undue risks with depositors’ money. If you don’t have solid collateral, or if you aren’t willing to risk what you have, then don’t expect to get commercial loan financing.

Small business administration guaranteed loans.
The SBA guarantees loans for small businesses in some circumstances. You still need to have 30% of whatever you need to borrow as collateral, but that’s a lot less than the normal 100%.

Friends and family
Many businesses start with financing from friends and family. This is sometimes the only way to start a business, but it is also full of potential problems. Go very slowly.

Self financed
Many businesses start without loans or investment, and many more businesses do their business plans without needing outside financing. If your numbers are strong enough to go without outside money, congratulations, that’s a very good thing.

  • jacob

    want to know about external borrowing fund how it is available,and where to contact

  • maria

    will venture capitalist invest in small business not requiring more than 50K

  • http://N/A BAVON

    Am a small scale farmer hoping to start my farming by September this year where am planning to plant horticultral crops for exportation. My farm is 15 acres found on a sem-arid area but fertile soil.Am based in Kenya.Nairobi.I will like to get financial assistance infiorm of a loan which i should return by three years. Inorder to by machines for irrigation and medicine.I will send you my business plan very soon. Your support to this will be highly appreciated.

  • Anda

    I am looking to start up a Public Relations agency with three of my former colleagues. What type of funding would one need for such a business? We will not be employing staff at the moment, but will enlist the services of temp staff whenever necessary. We still need to register our company and create a business plan. Basically, my question is, do we need funding for a services driven industry? (This is also taking into consideration that we would need to create a profesional website,advertise in the relevant trade journals, enlist the services of a Financial officer etc. etc.) Please advise.

  • David Shannon

    Wanting to start up a night club featuring 40′s, 50′s, 60′s and 70′s music. Will have plenty of glitz, activity, promotions and lots of era displays.

  • http://www.yellownote. Yellow Note Asset Finance

    Business Finance Brokers: We are able to raise funds on for new start businesses. Visit Yellow Note

  • Rox

    I just want to open a small lunch hut for the local populace that doesn’t want to go all the way into town for a quick bite to eat. how do i go abou getting capital for something like that, it’s not going to be a 5 star restaurant, or even a little cafe affiliated with a bigger business.

    It’ll just be a small lunch stop that anyone from working in a construction site, or someone making a pitstop on a road trip, or even someone locally wanting a quick bite to eat.

  • http://www,backinthepack.com Dari Ferguson

    I already have a caninie behavior modification/training business, but want to develop it into a center where troubled dogs can go to be rehabilitated and re-adopted. Many dogs are put down or given up on due to behaviors owners can not curve. I am here to prove them wrong. Need to figure out the best way to fund the development of the center, to house and shelter no more than 20 dogs.

  • http://www.AnthonyWhitaker.net Anthony Whitaker

    One often over-looked source of financing: A business line of credit. If a start-up can get by with 20 to $30,000 in start-up costs, a line of credit from your local bank or credit union can be enough funding to get your business on its way.

  • whitney

    How would i apply for the business fundings and where is the best place to look at?

  • Mrs. Inspired

    @ Anthony Whitaker, Does your business require a business plan and a credit score to apply for a business line of credit?

  • CHERONNE GRAHAM

    hello i would like to start up a small bussiness for my community ,but im ineed of funding i rather have a grant that way im not paying anyone back. how do i find who is available and intrested in giving this grant?

  • http://none Hans Erich Krueger

    Starting a 5,000 hectare cotton farm from bushland with ginning factory in Angola. We have technical knowledge and shall manage the project, but not the capital.
    Looking for a correct guide of business plan and for financial resources.
    Project to start in 2011.
    More details on request.

  • Donald R. Watson

    As others, I would like to start up a small business for my community, but i’m in need of funding, but I would rather have a grant that way i’m not payng anyone back. Ho do I find who is available and intrested in giving this grant.

  • http://bplans.com Quiana Baskin

    Starting a real estate investments and management firm and i was looking for tips and plans for entering this market. Thanks for the support

    Quiana Baskin, CEO

  • ISMAILA BOJANG

    I would like to start up a small business planning firm. However, my constraints are how to start it . Could you possibly give me the expert advise that i needed.
    I look forward to your reply soon.

    Regards.

  • http://www.investinabiz.com Erik

    I recently opened and closed a coffee shop, over the span of two months. The number one reason we failed was because we did not have enough funding. We tried to finance the business through personal loans and lines of credit. We were not able to line up enough money for operating costs for six months. If we had taken the time to present our business plan to investors we could have received everything we needed at a much lower interest rate. There are plenty of great sites out there to help small business get funded and find angel investors, and I wish I would have used them.

  • Ifezue

    Will venture capitalist invest in small business not requiring more than 10,000 dollars?

  • ahmed

    How do i get funding for a primary school based in a rural area. its a school that tries to extend education to rural disadvantaged kids who are academically gifted but having difficulty in tapping quality education. They take lessons under trees and on rocks that act as chairs. Many of them walk to school on bare feet and leave early to go back and fend for food. Some have one square meal a day, this has affected their concentration in school. Please , i will be much obliged if we get any organization or individual willing to support such a deplorable community , which is based in uganda- mbale called Ndega primary school. thanks

About the Author Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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