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Obtaining funds to start or grow your business is a challenge that almost everyone faces at some point. I've owned a business for almost 15 years now and I've been through it too. Here's a sample of what has worked for me and my thoughts on these funding resources:
Here is how I started my firm - $10,000 in personal savings. It took me a few years to set aside these funds, but I knew that I wanted to start a company and that I would need to buy a computer, software, business advertising, etc. to get it going. I also knew that revenue wouldn't come in as quickly as I needed to cover personal living expenses. Wow, how quickly these funds were spent! The interesting thing was the motivation that came from seeing the funds get smaller. I had to move faster and smarter or I was going to fail! Luckily, it worked for me and I was able to make it through the first year of business.
About 3 years into my business, I had a few employees, and I wanted to move into a larger office and fund the development of some software. These items were going to cost more than the funds I would receive from ongoing client revenue, so I went to my business bank and asked for a small business loan. The bank approved my loan because I could show steady revenue and I had a plan for the money beyond just business expenses. This was an installment loan with interest that would be paid back over two years. I made my payments on time and was in good standing with the bank.
Banks may require that you sign for the loan personally and put your personal assets on the line. This is a difficult decision to make. When you start a business and incorporate, the goal is to protect your personal money (home equity, retirement accounts, savings) but when you personally sign for the business loan, these items are being put up as collateral for the loan and the bank can take them if you default. Be sure to ask questions of your banker about what is being included as collateral and decide if you can live with the consequences.
The bank offered me a line of credit because I made my payments on time. This is basically a credit card that you write checks to use. This meant that I could tap the credit line when I wanted to buy things for the office or when I needed to make payroll and didn't have that "big check" from a client yet. A line of credit typically has a variable interest rate that is going to go up or down with the interest rate market. In 2012 (as I write this), the interest rate for me is 4.5%. This is cheap money for business funding and can be a great way to go. The downside is that you can depend on the money, use up the funds, and then not have the cushion that you need for emergencies.
After almost 15 years, I'm now looking into Angel Investment as an option to grow quickly, but I'm not sold on the idea yet. I have some contacts who can help me in those waters, and I'll continue to ask questions and then finally determine what is right for me.
Questions about grants have always been popular at WomanOwned and for good reason! Who wouldn't want free money to start or grow their company? Like any option for funding a business, grants is certainly something that you want to explore. There are thousands of grants available to you and it just takes time to research and apply for the ones that fit your business and your situation. Some of the grants are based in a certain US state, others are for a particular type of business (environmental or technical business). WomanOwned has collected the data needed on these grants into a searchable database that is constantly being updated and has made it available to you through our membership program. Search thousands of grants and find those that are right for you!
I hope this information helps you understand the different ways you can get funds for your business. WomanOwned.com has great articles about different ways to find funding for your business, so check out the links and I wish you much success!
An easy and always updated list of grants & opportunities with direct access to grantor's contact information as well as the application requirements.
Grants and Funding
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