Top Sources of Business Startup Financing

Are you looking for capital to start a new business? Then you will be better prepared to get to your own pocket. About 60 percent of entrepreneurs looking for financing to start a business use personal savings to get started, the Small Business Administration (SBA) said. Here's more on how startups get their value.

Personal Equity and Traditional debt Business startups are the main source of financing: about six (57 percent) startup owners use their personal savings for start-up capital. In addition, a quarter of a quarter starts its business without start-up capital. This approach is most common for beginners who do not have staff.

Here's how to break up other sources of money when starting a business:

• Personal credit cards: 8 percent
• Bank loan: 3 percent
• Other personal property: 6 percent
• Home equity: 3 percent
• Business Credit Card: 2 percent

If you take into account personal credit cards, “other personal assets” and home equity, startup owner’s use their own money to start a business, reaching 74%.

Starting with your own money is a little easier, but if you are just starting out as a startup with a noise chain. According to the SBA, nearly 2 percent of entrepreneurs who do not use start-up capital at all use about 2 percent of companies that launch start-up capital worth less than 5,000. About 21 percent of startups cost between $ 10,000 and $ 24,999. More than 14 percent have between $ 50,000 and $ 99,999 to start a business. Less than 10 percent of startup capital is $ 250,000 or more; most likely, they will be employing companies.

While most businesses of all types start without external funding, women-owned enterprises are more likely to do this than men-owned startups. More than twice as many men (0.6 percent versus 6.6 percent) than women use bank loans to spend money on their startups.

African American and Latin American companies are much less likely to use bank loans than Asian or Caucasian companies. Instead, these entrepreneurs typically turn to personal credit cards for seed money.

The idea of ​​starting a small business without bankruptcy may seem like a reasonable step, especially if you are afraid of getting a debt, but the SBA notes that this can pose a dilemma for women and minority entrepreneurs. Without applying to banks for loans, these entrepreneurs cannot establish strong banking relationships in the critical early years of their business. If you need money for working capital or expansion, then it is worth having a relationship with a banker.

According to SBA, about two-thirds of small business owners have debts. Using debt is not a bad step to start or expand your business if you do not do it wisely. What to do and what to keep in mind:

• Write a business plan. For a startup, a business plan will help you think through your strategy and determine how much money you need to borrow, and also help potential lenders be successful enough to pay off.
• Do not bite as much as you can chew. Startup owners are particularly optimistic about their chances of success. A more conservative view of your financial forecasts will not only affect the lender but also ensure that you do not go beyond a debt with more or less debt than it actually is.
• Keep some of your money. Ultimate lenders want to see that you are confident enough in your startup to invest your own money. You really cannot count on getting a loan if you are not ready to take the risk yourself.
• Do not rely solely on personal duty. When you use a personal credit card or home equity for seed money, you risk your credit rating (and possibly your home). Even if you have successfully repaid your personal debt, you will not create a good credit rating for this. Instead, try a business credit card and business financing - this will help your company rise and help it have a good reputation.