Business Start Up Capital - Common Questions

There are plenty of individuals who don't want to use up their precious savings to open a business. Are there individuals willing to take a chance on investing in a new venture?

Sure there is. This is where angel investors come into the game of raising start-up capital. These businesspeople aren't lending institutions and they don't give away their money, but they're people who have been in your shoes and have gone through the same difficulties you might be facing while you try to develop your business. Angel investors want to see potential profit figures, but they're also willing to be more benevolent and you can play up your plea of need.

What's the best way for a new business owner to prove himself or herself to investors, lending institutions, and angels?

Having a solid, flawless business plan is a must, if you're serious about showing others your business ideas have merit and potential. Starting a new business means you don't have a track record to fall back on, so you have to work extra hard to show investors that if they lend you money, you have plans to repay the loan. Write up a business plan that shows what you'll be selling, where and how, and to whom, as well as showing your ideas for promoting your business to consumers and potential clients. Keep in mind that discrimination is still alive in our society, and women, racial minorities, and younger entrepreneurs will have to work a little harder at proving themselves to others.

Does attitude make a difference in raising start-up capital for a new business?

Well, the answer is that how you sell yourself is just as important as selling your business ideas. Investors of any kind want to see confidence and determination to succeed. They also want to see a person that's level-headed who has thought every aspect of their business ideas through. Women tend to undersell themselves, so female entrepreneurs need to be extra careful to show that boost of self-esteem and confidence to investors.

Many people think that investors are limited to financial institutions. Are banks the only options for raising start-up capital?

Financial institutions can be a great place to secure a loan for the money a new business needs to get off the ground, but there are other investors out there that can be a good source of funding. Angel investors are one type of resource, and friends and family can help small business owners raise the funds they need. Just be sure that if you do borrow from your relations or close friends, you should be prepared to handle the difficulties of these types of business deals.

Some people want to know why borrowing money from friends and family to start off a business isn't always a good idea. After all, these people care about you and want to see you be successful, right?

Right. But that also means they may feel that since they know you well, they can give you advice about business decisions or even put your every move under a microscope to make sure that you're handling your business properly - the way they think you should handle it. Other investors are more neutral and tend to let you handle your business as you see fit, though these experts might be able to give you solid advice. What's important is that you maintain good relations with those close to you, whether you borrow from them or not.

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