You Have a Great Business Idea, a Burning Desire. and No Cash

Start on a Shoestring Budget

Many of us do this. I started my high-tech service business with a $10,000 nest egg that needed to pay for everything until the business got off the ground. Money went very quickly. $3,000 for a great computer, $500 for color printer, $300 for a fax machine, $500 for desk and basic supplies, $500 for phone line set-up and phone, $500 in software, $500 for a scanner, $600 in business incorporation fees (I did most of it myself), and $800 in print and basic marketing materials. About $7,200 was spent in basic start-up costs alone. I didn’t pay rent (home-based) and I didn’t pay any salaries. My credit was fine, and I didn’t owe anyone anything. If the venture had not worked, I was only out my own personal money.

Using Credit Cards

Many small business owners report that they finance their small businesses on numerous credit cards. Really risky, and expensive. The only time I’ve done this is to pay for something that I’m going to turn around and sell to my already contracted client. I know that I’m going to get my money in time to pay off my card before I get hit with interest. If you use this method and your venture fails, your personal credit could be ruined, you might end up declaring bankruptcy, or you will be paying back large amounts of interest on top of your debt.

Family & Friends

If your idea goes over well with your family and friends, they may be willing to help you get off the ground. Depending on how much money you need, this might be a good option. The down side is that you may have some strained relationships when your partners want a say in how you are running the business or when your investor wants his/her money back. Make sure that you talk about what strings are attached up front, and get it in writing. How much are they giving, how much (if any) interest are you paying on the money, and when do they want it back? Are you selling them stock? If you are planning on going the route of a Certified Woman Owned Business, then who you sell stock to is important. All of that data needs to be recorded and kept in your corporate file.

Another option is to ask family and friends to help you with the work of running the business (instead of using their money). Have them help you make up flyers, product displays, or to help fill the orders.

Grants for Women Business Owners

The thought of getting a grant (free money) from a private foundation or the government to fund our business seems like a dream come true. Sorry, but if you want to start a for-profit business, you won’t find too many grants to help you. If your business is a not-for-profit community agency that helps people in need, then you might have a chance. Don’t confuse grants with other programs to help women business owners. There are a good number of programs out there that help women in business obtain loans and training, but they are not called grants.

Little Loans

Most of the women that I talk with only want a few thousand dollars to get them off the ground. This money is usually spent on equipment or inventory. The good news is that for loans of $25,000 and less, many banks will approve the loan based on your personal credit with little hassle. The banks still want to see that you have a plan for your business, and that you will be personally responsible for paying back the loan. Don’t worry that the bank will have your husband sign, too. When I applied for my loan, they never asked anything about my husband or how much money he made.

Larger Loans

If you need a larger loan to buy an expensive piece of equipment, larger inventory or a building, you will need to look into SBA (Small Business Administration)-backed loans, or possibly state- promoted loans for women business owners. The bottom line here is that an outside agency (SBA or State) is reviewing your application, business plan, and history to put their seal of approval on you. With this approval, a bank will be more likely to lend to you. You must have a Business Plan and you really should talk to other business owners who have been through a similar process in your area.

Angel Investors

Not quite as bad as the dreaded venture capitalist, angel investors typically don’t try to come in and tell you how to run your business. However, they are very picky about the type of companies that receive their money. If you have developed a proprietary technology that will be the first of it’s kind, or have started a business that has wonderful market capture potential (think Starbucks), then Angels will certainly want to get a piece of the pie. They are increasingly wanting shorter returns on their money (5 years) so the product better be hot. Check out this SBA sponsored sites to bring you two together — https://ace-net.sr.unh.edu/pub/

The Dreaded Venture Capitalist

Many business owners would compare a VC (venture capitalist) to a loan shark. In actuality, I’ve met some very nice people who are VC’s. The bottom line is that if your business needs a million or so in funding, the VC might just be the ticket to make it happen. They will expect to have ownership over a certain portion of your business and most of them are very hands on. VC’s are usually very well connected folks, and they want to see you make money, so they may not only bring the money to the table, but also the networking to make it happen.