One of the biggest obstacles that most entrepreneurs will encounter is how to secure the funding they need to get their business up and running. Chances are even if you have a great idea, smart business plan, and strong support, you likely still need capital for overhead costs, product development, marketing, the list goes on.

There are many more options when it comes to funding a new business. From bank loans, private investors, or a combination of all of these sources. The only way to find out which funding source would be best for the business is to research each funding option and determine which is the best choice. One way that business owners can find out more about financing for new businesses is to talk to local banks, credit unions, and other funding institutions.

Find a Good Bank or Credit Union

Most banks are willing to work with new business owners because banks understand the need for capital to start a new business. This means that any new business owner should have a detailed business plan they can present to the bank. If the business owner does not have a detailed business plan, the bank will not consider them a good candidate for financing. Any good business owner knows that the best way to get business financing is by developing a strong business plan before beginning the business. Once the business is up and running, the business owner should continue to develop a solid business plan to attract more business.

Find a Co-Signer

There are a variety of ways for entrepreneurs to get their ideas up and running. One approach would be to find a company or organization that will co-sign a loan for the business. This means that the business owner is getting the financing that they need to get the business started, but does not have to provide a personal guarantee to the lender. The trick might be convincing an investor to co-sign on the loan. The business owner should be able to meet with the co-signer, explain the business, and provide a business plan.

The co-signer will typically put up some of their own money to help cover the business' start-up expenses. The co-signer should be someone who has a good credit history, has been a good business owner in the past, and who will be financially responsible for the new business. The business owner should ensure that this co-signer gets a reward for their investment, whether that is in capital or stock in the company, they are taking a risk by co-signing for a loan and should therefore be awarded accordingly. 

Find a Private Investor

Private investors are often another option for entrepreneurs who cannot get a bank loan. Much like a co-signer for a loan, private lenders usually require business owners to provide a personal guarantee or some sort of assurance that the investor will receive a return on their investment. The amount of money that the business needs to run the business can vary widely. As long as the business is expected to make profits, it can be considered a good investment. However, it can still be a risk for an investor.

When working with private investors, the business owner should understand the type of funding that they will receive and the capital type that they will be provided with. A bank loan is usually provided based on the business' projected income and the business' expected cash flow. There are certain types of private financing sources that require a business to have a specific level of equity, while others require that the business be totally owned by the entrepreneur. If an entrepreneur has a good business plan and a solid financial history, they may be able to secure a private equity loan. However, if the business does not have a solid business plan, they may not be able to secure a private funding source.

One last method for business funding that many entrepreneurs overlook when trying to start a new business is a combination of a business loan and private financing. The money that they get from a private investor will be used for the startup expenses of the business. The money that the business receives from the bank will then be used to make an initial purchase. The business owner will make an interest payment on the purchase at the time of making the initial purchase and they will then make an interest payment on the interest payment that they have received over time.

Finding funding for your new business can be difficult but starting a new business is rarely smooth sailing. As long as you do your research and put in the hard work, finding help with your new venture should be attainable.

Author's Bio: 

Katie earned a BA in English from WWU and loves to write. She also adores hiking in redwood forests and photography. She feels happiest around a campfire surrounded by friends and family.