Tips for getting financing for your small business idea

One of the biggest hurdles when it comes to putting your small business plan into action is financing. Starting a business is expensive, and few people realize the amount of money it takes to start one, especially when they haven't considered little things that add up, such as licensing, advertising, and so forth.

If you need financing for your business, the following are some resources for funding your small business:

Small Business Loans
Banks offer small business loans to those who are considering starting a business. Research interest rates in your area, and find out what you will need to do to apply for a loan. Obtaining a small business loan is typically a long process, so it's not like walking in and applying for a car loan. Make sure you understand everything that is required before applying, as this will increase your chances of getting funded. In addition, make sure your business plan is thorough and concise, as a well-planned and thought out business plan can also greatly increase your chances of getting financing.

The United States Small Business Administration also offers loans to start-up companies, but they don't just hand the money out. The SBA takes a variety of factors into account, including the business's credit history, collateral, business profile, cash flow projections, and other pertinent information. They will need to put together a portfolio that details the company's history and financial state, as well as that of the business owner or partners.

Venture Capitalists
If you feel like your idea is a real winner, you may consider getting funding from a venture capitalist. Venture capital is a type of private funding provided by investors that help to finance struggling or new businesses, and a venture capitalist is one who makes these types of investments. Usually, the venture capitalist or venture capital firm makes a return on their investment by way of a percentage of the profits. This type of funding is difficult to obtain, however, as venture capitalists are very selective in whom they choose to fund; about one in 400 businesses who seek venture capital are actually granted it. Venture capitalists are interested in companies that have very high growth potential and have sources to back up the claims, so if you are considering the venture capital route, put together a wining presentation and back it up with facts, statistics, and numbers.

Private funding
If you are unable to obtain funding from other sources such as loans, you may be able to borrow money from willing friends and family members, or by taking a mortgage out on your house. Before doing so, consider all of the risks involved.

Avoiding scams
Most would-be entrepreneurs have seen all kinds of ads or television commercials promising free money to start their businesses. These ads even feature people who claim to have gotten grants or tens of thousands of dollars free from the government after buying a "how-to" book.

However, most often, these types of offers that claim everyone is entitled to free government money are nothing more than scams, one that many experts and business consultants refer to as urban myths that won't go away. According to the small business association, Congress has not set aside any type of monies for the purpose of starting or funding small businesses.

These are a few tips and ideas for getting funding for your small business ideas.