The BizFilings blog covering business tips and trends.
Funding Options for Startups
Published on Dec 28, 2010
Read 'Funding Options for Startups' at 'Time to Start Up,' the small business blog by BizFilings.
Starting a company from home is a very common option for startups with limited funding. Apple, Google, eBay, Amazon and Facebook were all launched in dorm rooms, garages or homes using little more than a few computers.
Still, this does not mean that a fledgling enterprise will not need some sort of financing to help it reach the next stage of development.
Until the company can catch the attention of venture capitalists or angel investors, entrepreneurs can look to a number of other options for their financing needs.
Commercial bank loans can provide essentially all the funding a startup needs without the threat of managerial involvement. However, paying off the debt is easier said than done, especially as it takes a good amount of time for a startup to become profitable. The process of loan approval is also a more stringent process.
"Banks want to see two sources of repayment: cash flow from your business and a secondary source - typically collateral," writes AllBusiness.com. "Lenders will look at your past financial statements, including those of any business partners."
Home equity loans offer low interest rates and are easier to acquire. However, the risk of losing a home is often too great for the entrepreneur to take.
Startups can also consider credit cards, U.S. Small Business Administration-backed loans and equipment leasing. Although there is always almost a downside to a lending option, they should be considered on a case-by-case basis.