Business Startup - financing alternatives to venture capital

Often the media portrays the best source of capital for start-ups to be risk capital. Consequently, many people think that the funding risk is the only source of initial capital. Not only is this not true, but often in the early stages, an investment by a venture capital company means a huge loss of equity. There are a significant number of other sources of funding that a company can use the first step, especially if the company is in the high-tech arena.

If you are doing basic research or pre-product, take the time to submit for grants. Although this takes time and certainly not the fastest way to raise funds, the government and other funding agencies do not want to grant ownership in your company. SBIRs provide a six-month Phase I grant for $ 100,000, followed by a significantly higher grant for Phase II, from $ 500,000 to $ 750,000. If you apply for and win two of these scholarships, you can get a good start to fund your company.

If your company needs only a small infusion of money, you can get an SBA loan, or if you have a good relationship with the bank, a credit line. In addition, the bank will lend against your credit, if your customer base is reliable. Many people are afraid to tap into sources of debt, because they will not be burdened with the debt if the company fails. However, if you do not believe in the company enough to put their credit behind it, why should anyone else.

If you are looking for less than $ 1 million, to tap into a local angel network. If you do not know any rich people, find them. If you can not collect $ 1 million angel investment, your idea may not be as good as you think ... or may not be the right person to sell it. Seek help through local business development agencies, groups score or technology incubators. These people are all related to fund-raising network in the state.

Consider contract work to fund product development. If you have the right equipment or people to handle small part-time contracts, use these receipts as a source of funding. Use creative ways to keep costs low. Join an incubator to use the services offered at a lower price. Barter is another great way to get the use of space or equipment that would be prohibitively expensive.

Part of being an entrepreneur is being creative. Use creativity in financing your business and save the venture capital for the growth phases....