In the past many new business owners funded their ventures through home equity lines of credit. But with the decrease in home values over the past few years, it's been tougher for the start-up business owner to rely on home equity for funding. So what's a new business owner to do?
An article from the Wall St. Journal discusses How to Finance Your Start-Up without Tapping Home Equity. Some of the options include:
- Peer Lending - sites like www.prosper.com and www.LendingClub.com or Crowdfunding through www.kickstarter.com.
- Asset-Based Credit - loans backed by marketable securities, equipment, inventory, accounts receivable and other business assets. Also factoring.
- SBA Loans - Bank financing can often be tough for true start-up. Usually more viable as business becomes established.
- Angel Investors - The Des Moines Business Record recently had a story on Angel Investors in the tech sector. The number of angel investors are increasing in Des Moines and throughout Iowa but still low compared to some other parts of the country.
- Personal Credit and Savings - most businesses are funded this way. Bootstrapping a business can be very difficult. And not having enough capital can be fatal to the business.
All of these funding mechanisms are also in play for many franchises according to the Fox Rothchild Franchise Law Update. John Gotaskie says in his post that recent conversations with angel investors leads him to believe that angel investors are getting antsy from sitting on the sidelines and are interested in returning to the fray. If true, that's good news for franchises and small businesses alike. The momentum occurring throughout Iowa in the start-up community is also a good sign. You may need to get creative and beat the streets but funding is out there.
See also:Does Your Business Need an Angel?