Building a Small Business Fund

Do you have a brilliant new idea for a business? Have you discovered a service that no one else is offering, but that everyone needs? Is your newly developed product the next big thing? The only way that you will ever be able to find out is by building a small business fund and getting your business started. There are several basic business models that work. The most basic way to break them down is service versus product. Some businesses sell a service and others sell a physical product. There is always room for innovation within any industry, so it is not unusual to see new businesses opening their doors every day.

Getting together a small business fund to provide starting capital is the hardest part of opening a new business, for many. Those that are already familiar with business will have an easier time, but getting buy-in from investors can be very difficult; particularly since you do not want to provide too much information for fear of another company beating you to market. Getting together a group of investors is often the best way to raise enough capital. However, once friends and family are exhausted, what do you do?

First you need to identify how much in the way of a small business fund you need. Then you need to ask friends and family how much they are able to commit. You can then go to banks with a solid number of how much you need to borrow. If you are opening up a business, you will need a considerable amount of money. The original investment amount should be enough to take care of all startup expenses and enough to pay recurring monthly bills for the first six months. If you are trying to develop a product, you will only need enough money to obtain a model. Those opening retail stores or offering business services which require state of the art technology will cost considerably more than simple service business models. For example, it is much more expensive to set up a garbage processing location, than it is to set up a simple accounting office. The equipment for the first one is much more expensive, while simple office equipment and furniture can be obtained for very reasonable prices.

Setting up a small business fund for a business with low startup costs is much easier than setting up a larger fund. However, if you need a lot of money, there are a couple of places that you can look. The first is a traditional bank. Banks fund business startups all the time. There are a variety of business loan packages, and for those with good credit many of them are signature loans. If the amount of the loan is very high, then you might need to put up collateral against the loan. Unlike with a mortgage, where the loan amount must be no more than a certain percentage of the value of the house, collateral for business loans often only needs to be a percentage of the total loan amount. The collateral is more a gesture of good faith than it is intended to secure the entire loan.

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