Of course the most popular source of finance is yourself. Your own assets. However, we’re going to give you an overview of the different sources available, but before we start a quick word of advice.

Before you lend anything, focus on reducing your loan requirements. At WDTD we have a variety of tools to help you do this and save you money. So let’s look at your options.

Before we start, we’re assuming that you have a well prepared business plan. If you don’t, you should stop reading this and get that part done as it will reveal just how much cash you really need. Our free 35 page business start up guide can help you with this.

So what are your options when looking at finance loan business.

1) Family and Friends

By far the most popular source of funding after your own pockets. make sure you’re 100% honest about the upside and the risks and also document everything including the amount loaned, the terms of payback and any additional promises you have made. You need to do this in case things don’t work out.

2) Line of Credit

A line of credit is essentially an agreement between you and your bank that they are prepared to advance you $x whenever you need it. It’s based on your income and credit worthiness. Interest rates are variable as you take the advances, but you choose when you need the cash.

3) Loan from a bank

You’ll most likely succeed with a bank where you already have a relationship. It’s well documented that banks are currently very slow in lending money. Do your homework and compare the terms of local and national banks. A well prepared plan and presentation is a must. banks are not lending as much at the moment, but it’s how they make money, after all.

4) Government sponsored organization

Depending on the business you are in, if you’re a minority and many other factors you may be able to secure a loan from the government. one of the main challenges here is navigating through what seems like endless administration.

Be clear about the difference between a loan and an investment.

A loan is something you are committing to pay back along with interest. It’s usually secured againsy an asset of yours, often a house.

An investment is wher you seel a part of your company for cash. Angelique and I have worked with Angel and Venture investors. They will give you  cash in exchange for part ownership. However, these tend to be for large business ideas with major potential and upside.

It’s a tough time for finance loan business. With a great plan and the right support it is not impossible. Good luck!

So let me surprise you and say this is not going to be about banks, loans, credit lines, venture capital, seed money, angels or anything else like that.

We need to get to the nuts and bolts of financing your own business. OK?

Here are our 4 rules of finance for your own business:

1) Get your own finances under control

If your personal situation is not in order, it’s unlikely you’ll manage your business finances any better. Starting your own business will incur some costs. So look at your personal expenditure and make sure that you’re only spending what you need. We have tools to help you do this.

It’s amazing how much you can save and how much fun it can to do it. Tightening your belt and being frugal is a skill you should learn. There’s nothing wrong with it!

Now look at your assets. Stock, bank balances, etc. This will help you understand how much you can afford to invest in your new business. Each month you save money, add it to the pot.

This is finance in business at the micro end, but it’s just as important!

2) Don’t give up your current job

You do not need to give up your job if you’re thinking about starting your own business. It’s probably your main source of income at the moment and you’ll need it as long as you can. We call this “moonlighting” and it’s done by most people who start their own business.

What you don’t want to do is give up the day job and then realize that your idea does not work! That’s a disaster, particularly at the moment, in the current economic mess.

3) Make smart plans

As you develop your business idea you’ll create your first business plan. Part of this plan will be an assessment of how much cash you need. The smart plan also looks at what we call cash flow.

One of the mistakes people make is to just think of the cash they need to launch or start your business. You will need a reserve of cash until you are profitable. So plan for the equipment and start up expenses and then plan for the losses you’ll incur before you are cash flow positive.

4) Spend wisely

It drives Angelique and I nuts when we walk into a new business and see the owner with expensive office furniture, nice offices and all that stuff. Don’t fall into this trap.

Spend money on what you need and not what you want. Cash is your life blood. Don’t throw it away on excesses. You won’t be impressing anyone. Once you’re profitable, there will be time for perks.

Finance in business starts with getting the first things right. As we move forwards we will cover other issues for you.

In fact it’s not just a question related to women.

You probably saw that President Obama is now focusing on loans for small business. His proposal is to take $30 billion of the repaid TARP money and give it to small and medium sized banks so they will increase their lending to small business.

“We’re going to start where most new jobs do — with small businesses,” Obama said at a town hall meeting in Nashua, N.H. This was a repeating of a statement he made in his State of the Union address last week.

The issue is that banks have been receiving bailouts and then not lending to small businesses. The knock on effect is that small business is not hiring people to work as they are very cautious about coming months. net result, the economy slows down even more. Did I just read that 1 in 6 people are now unemployed or working less?

Anyway, back to the question of small business loans women. Here are a few sources for you to start looking, if you are a Woman Owned Business (WOB):

Community or small banks that are local to you. Many people are switching away from the “too big to fail” banks to smaller community banks. You’ve probably driven by them in your town. Drop in on one of them and have a chat. You many be surprised!

The SBA (Small Business Administration) has a whole area devoted to women. Their Office of Women’s Business Ownership is a good place to start.

Federal Grants – Try going to Grants.gov and you can see a complete list of funding opportunities. This can be complex and drawn out, but if you need cash….

There’s no denying that getting small business loans women, or anyone, is tough at the moment. But use your ingenuity and don’t forget to be armed with a very well prepared business plan. There is also a good article at on this at Womenowned.com by Phyllis Rawley.

Of course, once you’ve been successful everyone wants to jump on board!

So here are five things successful people do to raise money.

1) Get clear on how much you need and why

This sounds obvious but don’t skip this paragraph it’s important! We constantly meet people who answer – about $50k. What that tells us is that they neither know how much they need or exactly what they will spend it on.

In your business plan you should have identified exactly what you’ll be spending money on and when you’ll need to spend it.

Tip – there are broadly two areas of cash you’ll need. The first is setting up before you launch and the second is financing yourself to profitability. Your requirement is the sum of both.

Now list down the areas where you’ll spend the money. What equipment do you need? What inventory do you have to buy? Is there any payroll? Etc.

2) Prepare a business plan that potential investors can easily review

This is your number one sales tool for an investor. You should also be able to present your ideas, plan and needs in a few minutes. So get focussed and clear.

Tip – Short plans and presentations are more likely to succeed. in fact, you should be able to explain everything in an elevator pitch lasting no longer than 60 seconds!

3) Be honest

Investors are your partners and your friends and you want them to stay that way. Don’t “sell”, be balanced in your discussion. Never hide facts or risks. It’s important that they don’t feel that they were lied too or sold something that was inaccurate.

4) It’s your business – Invest in it!

Here’s one of the most common questions a smart external investor will ask you. “How much you are investing personally?”.

You can invest in two ways. Cash and “sweat equity”. Cash needs no explanation. “Sweat equity” is about you being paid nothing or very little until the business is profitable.

Would you invest in a business where the owner was not prepared to put money in themselves?

5) Understand your options

We’d encourage you to think broadly about that. We’ll assume that you don’t need $5-10mm dollars and that VC’s are off the table for this discussion. We’ll also assume that you’re starting a new business and not looking at secondary growth financing strategies. Ok?

a) Lets begin with you

Tip 1- Analyze your current personal expenditure, make cuts and start moving cash each month to an account that you’ll use for your business.

Tip 2 – Summarize your cash and other liquid assets that you can use for the business.

Tip 3 – If you have a job at the moment. Don’t give it up – yet!

Tip 4 – Many use Credit cards – We don’t like this as the interest rates are awful!

Tip 5 – Don’t remortgage your house! You need to consider the consequences of failure even when you’re full of optimism. We preach a conservative financing strategy – only invest what you can afford to lose!

b) Your vendors

Financing your new business is often about cash flow.  If you already have a relationship with a potential vendor, go and have a chat with them.

Ask them if they will give you extended terms. For example. Instead of paying your bills in 30 days, ask for 90 days for the first year of your business.

You must commit to moving to their normal terms after a certain time period.

They will be interested because they will be getting a new customer who they already know. Your business will likely be small for them and the deferred payment meaningless in their big picture.

This can be huge for you!

c) Friends and Family

We have used friends and ex colleagues on our early businesses.

Tip – Be honest and, if you can, try and spread the risk over a few people versus one big chunk off a single investor.

Our preferred method is to consider it a loan with agreed interest, a committed repayment period and a ‘gift’ at the end for a thank you.

d) Banks

We all know about banks and the issues they have been having lately.

They are not investing! A bank will lend you money, but they will want collateral.

To be successful with a bank you’ll most likely need to already have an account and some history. Now add your business plan and your capability to demonstrate to them that you know what you’re doing and you’re a secure loan.

Business financing may at first sound intimidating, but if you follow these steps you’ll already be on your way to raising the cash you need for your business. Remember, that it all starts with you!

Be successful

Rob & Angelique

PS – Several people have read this and asked if we’d invest in their plans. We would often like to, but we don’t because it makes the relationship way too complex!

We’re always hearing this concern or question – It stops many people from ever starting their own business.

But it shouldn’t stop you. What they are really talking about is their fear of the unknown.

We call this THE CASH BARRIER.

We’ve put together a new guide for you. It’s called “Breaking Through Your Cash Barrier”

You can download it right here.

Your guide will answer your questions on the cost of starting a business. You’ll quickly see how successful business people find out how much a business will cost. We reveal the way experts manage cash, reduce risk and tackle the start up phase of their business.

But that’s not all. You’ll then learn 5 proven techniques to raise money. And we let you see the strategies today’s entrepreneur’s use to cover their costs.

So how much will all this cost you? Absolutely nothing. We’re passionate about people starting successful businesses and want you to not only get started, but feel confident about your new adventure.

After all, running your own business is supposed to be fun!

Be successful
Rob & Angelique

PS – An extra tip. Starting your own business can be really low cost if you know what you’re doing. At our second company our main investor said he’d never seen one of his portfolio companies run that cost effectively. Remember, it’s not about being tight fisted or mean. It’s about making smart decisions and not being wasteful. Saving money can be fun – you’ll learn how.