Get Your Business Funded: Creative Methods for Getting the Money You Need

Overview

The first place people usually think of when they want to get outside funding for their business is a bank, and that makes sense. Banks are in the business of lending money, they are good at it, and commercial lending is a bank's bread and butter. Banks especially like business clients because, as opposed to personal loans, business loans are typically larger and the risk is usually smaller.

Your ability to get a commercial loan from a bank depends upon many factors, but the first to consider is this: Do you need the money to start a new business or to run and/or grow an already existing business? The tough news is that traditional bank loans are much more difficult to obtain for a new startup than a more mature business (not impossible, just tougher).

Why is that?

It makes sense if you think about it. Banks are in the business of lending money, yes, but they are also in the business of making safe loans that have a high likelihood of getting repaid on time, and that make them money. But of all the loans a bank could make—to an established business, for a mortgage, for inventory, and so forth—loaning money to a new startup is probably the most risky. Consider the following:

• Startups have no business track record from which to base a lending decision.
• Startups have no sales track record so as to calculate profitability.
• Startups typically have few items with which to collateralize a loan.

So that is the general rule: startups don't get a lot of regular bank loans. But ...