Entrepreneur Funding Options for Startup Enterprises

entrepreneur funding optionsAs our economy seems primed for recovery over the next two years, the best time for completing a heavy planning exercise for your “green business idea” is now. Timing is everything in business, and the present “lull” affords many aspiring entrepreneurs the opportunity to prepare in advance for the “impulse” wave that is sure to come shortly. Planning and preparation is key, but previous guidelines on how to find initial startup capital to get you past the critical early development stage have “morphed” into a moderately different profile.

Yes, the rules have changed dramatically over the past decade, and all for the betterment of “clean-tech” small businessmen. The “virtual” age has arrived, but one area that has become more challenging, however, is acquiring adequate financial funding, the primary reason that most startups fail early. The previous decade has literally “scrambled” the playing field. If you have substantial capital that you are willing to risk in your new pursuit, then you are well ahead of the game. If you are like most Americans that are under water on their home mortgages and struggling to find new sources of revenue, then the path to securing startup capital may prove more daunting than expected. Here is a list of potential funding sources, organized by increasing level of difficulty:

  • “The 3-F’s” Friends, Family, and Fools: The people that already know and trust you offer the easiest path to obtaining early funding. This group includes any lines of credit or cash advance possibilities on existing family credit cards. Trying to sell friends on your concept is also a good training ground to prepare for the more difficult investor audiences.
  • Vendors and Business Partners: These groups will naturally benefit from your success because you represent increased sales for them. Don’t be shy in asking for advances that will help you build inventory or for longer terms for paying bills. Everyone recognizes how slowly cash turns over these days. They, too, are waiting for new growth to fuel our economic recovery.
  • Development Agencies or Incubators: Every state and major university has established one of these agencies or incubators in a region near you. Seek their support to gain access to their networks of financial and business support patrons. These groups can also assist in filing for grants, an “art form” that only the experienced hand can make work.
  • Your Local Banker: Unless you have large deposits on account or an income level that will support new loan payments, your local banker will most likely shun any request on your part for a loan. Most banks have suffered heavy losses recently and credit rules are tight. If you do have home equity, they can help with an SBA loan application. They generally do not invest in the promise of an idea, but they do have broad networks of contacts that may be able to help you. Approach them with this intent in mind.
  • Angel and Venture Capital Funds: This industry is still licking its wounds from years back, and most capital raised is used to shore up the poor performers in their existing portfolio. Each fund manager may see fifty or more potential “deals” in a month and may select only one a quarter for further study. They usually demand that you already have paying customers for your business solution. If you believe that you can compete at this level, then get prepared, but expect a four to six month timeline before any check is written.
  • Online Funding Services: A number of online funding services and communities have sprung up to help entrepreneurs find funding outside their geographic area and existing networks. Some, like RaiseCapital.com, incorporate social networking features to help entrepreneurs connect with investors, others, like  Prosper involve peer to peer lending.  Others, like Small Business Loans Direct is provide merchant cash advances and small business loans.

When starting your new venture, be sure to leverage your local networks and seek small business loans directly from new “virtual” sources before approaching the more time-consuming and structured alternatives.

This post was written by:

Lorna Li

Lorna Li is a social media and green marketing expert. She enjoys helping green businesses and nonprofits with bootstrap marketing, as well as helping job seekers leverage social media for personal branding.

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  1. JennyL says:

    I think everyone should be trying to go-green with their start-ups. It’s so important to the future of our kids, and their kids.

  2. Yes, now is a great time for funding green projects and businesses. With interest rates so low, there is investor capital seeking higher returns on investments in private businesses can provide a better return. I’ve found that its worth investing after a business has shown some signs of life and has customer adoption. If someone wants an SBA loan, then the business really needs to be profitable and not just be an idea.

  3. Tushar says:

    It will be great if we kick out plastic from our day to day life. It will save us from pollution. I am from India and in India it should be compulsory.

  4. ryan says:

    Getting hold of capital is the hardest part and not easy to overcome.If you don’t have a proper business plan in place then you will really struggle.other than that have to agree now really is the time to jump in although easier said than done.

  5. Sean says:

    Getting a loan from family or friends for startup capital is one of the worst decisions you can make when you are starting a business. Something like 50% of all businesses fail in their first two years – if you never get around to paying back that loan, you are going to RUIN your relationship.

  6. Kerry Witt says:

    I agree with you Ryan,when getting into business know your passion.
    study the business you want to engaged .Planning ,financing,executing action plans are always critical.

  7. Eric says:

    I agree with Sean, I would never ask family or friends for start-up funds. There’s too much risk for financial hardship, which can put terrible strain on your relationship. This is the same reason I wouldn’t want to go into a risky business venture with my wife!

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