Money makes your business go on. But don't expect a bank to give it to you when you've just started in business. Banks normally make loans to businesses with operating histories.
Still, don't be discouraged by not having much money to start with. Many businesses can be started with no money at all. Here is a list of some businesses you can start with very little cash:
- Coaching
- Computer programming
- Consulting
- Online auction listing for others
- Delivering dinners for restaurants and clients
- Event planner (parties and events)
- Flower bed care for commercial buildings and offices
- Freelance writing for media
- Hobbies can become businesses: cookies, decorated cake, etc.
- Holiday decorating for homes and businesses
- House cleaning
- Personal shopper
- Personal trainer
- Photographer (weddings, parties or businesses)
- Resume writer
- Care services for old people
- Teaching/tutoring: computer, musical instruments, languages, etc.
- Translation services
- Website design and management
Consider personal savings as the primary source of funds for starting a business. If you haven't started already, start now to begin accumulating cash through personal savings.
Where you need financing it is a good idea to gain some understanding of different type of credit. Some credit is granted on an unsecured basis, such as credit cards, and loans from friends and family. However, most small business loans are secured by the assets of your business, your personal assets, or both. Unsecured means that there is no collateral, or something pledged to the creditor in case you default on paying back the loan.
Secured loans mean that there are assets pledged to secure the payment in the event you are not able to pay. Common types of collateral include equity in your home, money that is due to you for services rendered or goods sold, stock and equipment. Lenders go through an evaluation of the collateral to determine how much they can lend. Some key variables as to what kind of loan terms you can get are
- Number of years in business - this is your track record and is very important.
- Size of your company and the amount needed - financing institutions vary in the way they service the public. For example, you would probably not get a car loan and a large corporate loan at the same place. Do your research. Ask around. Get to the right spot.
Sometimes the money you are loaned gives the investor an ownership interest. This is called equity, and is common in the sale of stock to a limited number of investors, including family and friends. If you go this way consider the implications on your ability or freedom to run the show as the investors will get voting rights.
Common documents required to apply for business loans include
Business financial statements
Business tax returns
Business plan with budget or projection
Personal financial statements
Personal tax returns
So start keeping the necessary records if you plan to seek financing in a couple of years. Be ready to answer questions about your business, and be ready to highlight your financial performance both in the past and in the future. You will be more impressive if you have carefully thought out and become familiar with your plan.
