3 of the Most Common Ways to Finance Your Start-Up Business Today

Ways to finance your start-up business have been around for ever - probably since the very first business opened its doors.

However, we live in a different world today. Many of those old options have disappeared.

Tapping friends and family is out of the question as the current financial mess has left them holding on tight to whatever cash or resources they might have left.

Home equity values are down or underwater.

Even some of the new players in the start-up business capital markets have dried up over the last few years.

But, as with every challenge in business, where there is a will, there is a way.

Today, you no longer just have to think outside the box - you have to think outside all boxes, creates or containers - even outside the one that was holding the first box you were thinking outside of.

If that sounds confusion, the following 3 most common methods of start-up business financing should not be:

1) Don't need so much capital.
While this might seem to be a bit stupid, one true way to raise enough capital to get your business up and running is to not need so much money.

Scale back and start smaller - then use each small success to reach (or finance) that next level.

Enrich Flooring is going through this right now. This company, founded in 1998 ended up closings its doors in 2006. But, just recently decided to start it up again.

The company was use to landing $150,000 to $200,000 jobs - this was their norm. Thus, it started to bid on those types of jobs again.

Come to find out, it could not obtain enough money to cover the workers compensation insurance to handle jobs that large and thus kept getting its bids rejected - no matter how many pleas.

So, now the company is starting on a smaller scale. It has now landed 4 solid $15,000 jobs and is pooling all that it can to secure the money it needs to cover a larger insurance bond.

2) Owner financing.
For those seeking to buy a business, more and more are turning to owner financing.

Here, the buying person only has to come up with 10% or 20% as a down payment and then let the business itself make the monthly loan payments.

While this was not such a hot option a few years ago, more owners looking to exit their businesses and struggling to find buyers with cash or the means to the capital needed - have once again opened themselves to this form of financing.

Much better on the current owner's part to work a favorable deal (especially if the current owner believes in the business) then to let the business slip or shut - further reducing its salable value.

This is especially beneficial for those seeking to buy an existing franchise.

3) Social networks.
Over the last decade, we have seen more and more companies create platforms to bring lenders and borrowers together.

Now, these are not for professional lenders to find businesses and ideas to lend to but for people from your social network who are looking for better returns on their disposable income than they can get from their bank or even the stock market.

There are companies that offer peer-to-peer loans where people just like you invest little amounts (usually around $100) in ideas or businesses they want to fund. Get enough of these small lenders together and your total loan is funded.

We have also see the return of Crowd Funding where business ideas or business projects can cobble together enough seed capital to move the project or idea forward - usually at no additional cost to the business.

Lastly, there are now more and more new ideas coming out in the field of private equity for start-up businesses.

Much like the peer-to-peer lending industry, there are now firms that offer peer-to-peer angel and venture capital; where small investors pool their personal funds into a larger angel or venture capital fund. Then, the company, on behalf of the fund and the individual investors, seeks out and invests in promising new businesses.

There are always obstacles in business and for the most part, start-up businesses have always struggled raising capital.

But, if you really want to see if you have what it takes to become a long-term success in business, then get out there and see what you are made of.

If you can land some form of start-up business financing in this market then that should go a long-way in boosting your own confidence. Do know that financing your start-up business won't be your only challenge and might not be your worst.

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