Looking for loans

The problem with borrowing money from a rich uncle for starting a business is that 1) the funds can be stopped at any time; 2) your uncle ordinarily can not provide the practical advice necessary for growing the business; and 3) your relationship with your uncle might be ruined if the business goes under.

Two alternate methods of looking for loans are as follows: SBA loans and venture capitalists SBA administers three separate, but equally important loan programs. SBA sets the guidelines for the loans while SBA’s partners (Lenders, Community Development Organizations, and Microlending Institutions) make the loans to small businesses. SBA backs those loans with a guaranty that will eliminate some of the risk to the lending partners. (www.sba.gov) The advantages of a SBA loan is that often it is usually easier to get a SBA loan as opposed to  a traditional bank loan and the SBA itself is an invaluable resource of information and classes about starting a small business.

Venture capital is money made available for investment in innovative enterprises or research, especially in high technology, in which both the risk of loss and the potential for profit may be considerable.  Venture capitalist finance startups in exchange for a share of stock once the company goes public.  Normally, financing is done in rounds.  For example, a company is given 12 million dollars and, once that money is exhausted, it applies for another round of financing.

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“SBA Financing Basics” (n.d.).  Retrieved from http://www.sba.gov/financing/basics/basics.html

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