Starting a business brings a host of challenges. There are many new things to learn and figure out. Sometimes the unknowns seem to outweigh the knowns. At the top of the list, for all but the independently wealthy, though is how to finance your start-up. Most people’s mind jumps directly to “I guess I’ll have to get a loan from a bank”. Bank loans are certainly one way to finance a start-up, but, there are many others as well.

Can I fund it myself?

When asking that question, most people’s first thought is “how much do I have in the bank?”. Savings is certainly part of the equation, but, there are other “self-funded” options as well.

  • Cash – if you have enough, why not?
  • Do you have a 401K? Many 401K programs allow you to take a loans?
  • Do you own a home? Could you do a Home Equity Loan or Home Equity Line of Credit?
  • Do you have other assets you can borrow against?

What about Angel Investors?

Angel investors can come in many different flavors, in this case we’re talking about “friends and family”. Do you have family members who are financial able to underwrite your venture? This can be done a number of different ways. You can sign a private note (loan), where you agree to pay back the loan to the investor. You might also consider making the investor a partner in the business where they put up the cash (or some portion of it), and you do the work. This is sometimes referred to as sweat equity.

Another option is to create a “Family Business” with friends and family, where everyone puts up a some portion of the costs in exchange for some ownership percentage of the business. Think of it like an investor club, where you spread the costs across several people, but, by bringing in additional people you can do things you couldn’t be able to do on your own. When talking about family or friends businesses, it’s important to note that not everyone has to be an equal partner – everyone can put up a different amount and take a different ownership percentage.

What about Commercial Lending Options?

There are definitely commercial lending options for those who apply. Some programs favor businesses that already exists, and others are designed for true start-ups. Each program will have it’s own set of requirements and qualifications, so it is difficult to give specifics on programs, and the requirements often change over time. If you’re interested in pursuing commercial lending our first recommendation is to always speak to your current banking institutions first, whether you bank with a local bank, a regional bank, a credit union, or a large national bank, to them you are a “known quantity” which may make lending to you an easier decision.

Want to learn more?

Big Sky Dog Wash is offering an on-line webinar focused on financing your unit. You can sign up here: