Thursday, November 19, 2009

Show Me the Startup Money

You have the idea and the knowledge. The desire, drive and ability are there. You're ready to dive into that new business but, alas, you lack the money to start. Where does an entrepreneur secure the necessary start-up capital for a new venture?

By far, the easiest source of funds is from family and friends. Roughly 13% of all Canadian entrepreneurs use this route. Keep in mind, though, that family and funds don't always mesh well. It may be a better idea to have a relative or friend co-sign or guarantee a loan, rather than lend their own money.

Certainly, the lender with the most available cash is the bank. Unfortunately, though, banks often pose the most obstacles to borrowers. One solution to satisfying the bank's criteria is to apply for Small Business Financing via your bank. This federal program is backed by Industry Canada and guarantees 85% of the value of bank loans.

Angel capital may work for you. "Angels" are investors, generally former business executives or entrepreneurs. In addition to their money, they also can offer expertise and contacts. While they are not seeking control of your company, they do expect a healthy return and may wish to take an active role until their investment is returned.

It is well worth investing some time and energy to see if any government programs are applicable to your needs. Generally, these programs offer favourable terms and have flexible payment options.

Some 22% of Canadians have used credit cards to fund their start-ups. By checking interest rates, some have found these loans to be to their advantage.  Also, as new credit lines with lower rates become available, older loans can be repaid and interest saved.

Consider all your options and best of luck in your new business.

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