Where To Go To Secure Capital For A Start Up?

How Do You Secure Capital For A Startup?

The first thing to discuss is where not to look when you’re trying to secure capital for startups, which is in the most obvious places.

Unless there is a government sponsored loan program administered by the major banks, the lenders that you see on the television every day have absolutely no intention of lending you any money for a start up business venture.

Yet because of our branded conditioning, it tends to be the first place everyone goes and the first place they get turned down too.

Once you have maximized your personal financing potential and taken full advantage of you family and friends, you have to start thinking outside the box whereby the box being walking into a bank and applying for a loan.

First, focus regionally.  Wherever you are, there is going to be local, regional, and national business development programs that are designed to increase the business tax base and maintain or add jobs to the economy.  These business development programs are designed largely for businesses that are not yet “bankable” but have a sound basis for commerce and intend to hire employees.  And while many of these types of support programs tend to focus on small dollar loans,  there are exceptions.

More specifically, I’ve seen some regional development programs that will shell out millions in loans and guarantees for the creation of industry and jobs in certain areas.  This of course is area specific, so if you want to get access to the funds, you have to be willing to relocate to the area that has the money.

Second, government grants and loans are out there and can be secured.  However, most government grants and loans are in place because there is a lack of some service or product that they are trying to draw business owners towards.  So if you want to take advantage of government funding, then you may want to research what they are supporting before you choose your business venture otherwise there may not be anything available for what you choose.

Third, other related businesses that want a certain type of product or service, but can’t readily access it and don’t have the time to create a related business themselves.   What could be better than having a major customer right off the bat that also has a financial stake in your business and is therefore motivated to help you succeed?

Fourth, there are equity investors that are on the look out for businesses they can buy into.  Just remember that this can be a very demanding form of capital that is typically looking for high profit potential and experienced partners that know what they’re doing and have a track record to prove it.

If you want to start a venture that requires capital, then you need to work backwards from the available capital sources.  That may sound counter intuitive but its not if you think about it.  From a marketing point of view, you are always taught to work backwards from established market needs and wants instead of forcing something new on the market or guessing at what will make you money.

When business financing for startup capital is involved, you have to work double time and work back from the market and from funding sources.

In reality, there are four scenarios that evolve out of the someone wanting to start a new business.  1) You want to start up a business providing things that not enough people want and there are no sources of financing for that type of business available to you. 2) You want to start up a business providing things that not enough people want, but there is some available sources of financing.  3) You want to start a business that has high customer demand, but no sources of financing.  4) High demand, and money available.

Too many people choose 1, 2, or 3, and get nowhere fast.  But even if you do your homework and focus on #4, there is no guarantee of success, but you’ve increased your probability of a profitable outcome just by not swimming against the current.

Bottom line, there is no magical place that provides start up money for any type of start up.

But there is also an infinite sea of money always looking for a home.  When you focus on a real market need that you can tap into where there is available money to scale the business, then you’re on the right track.

Securing any type of capital is always about having something to leverage.  If  you have a great business idea that the market is hungry for or just needs more of what you want to deliver, and you have a solid plan to move forward with, that’s a great start.  But take a hard look at potential sources of capital as well that are motivated in some way by what you’re trying to do.

If you can put market demand and money availability together, then you’ve got something to secure capital with.

If you’re looking for more specifics,  I don’t have any.  Each scenario has its own set of variables (market, individual skills, geography, economy, competition, industry, etc, etc, etc.)

Where to look for start up capital has everything to do with understanding the relevant variables which will help point you in the right direction.

About the Author Brent Finlay