Financing A Start-Up Business

You’ve done all your market research, completed a business plan, and now you are trying to fund your business. Then, you take your business plan over to the local bank to pick up your check.

The banker takes a look at the business plan and says we will let you know. A few days go by, and the banker calls you and says they are not interested. Now what?!

The percentage of start-up businesses that a bank actually finances is extremely low. It’s estimated between 10-20%. Banks base their underwriting standards on historical information. So, when you walk in the door to ask for money for a start-up, you are already behind. Banks can overcome the lack of historical numbers with a solid business plan, experienced management team, good equity in the business, and a proven idea. If your idea is “out of the box,” then your likelihood of getting traditional bank financing is extremely slim.

What are your options for financing a start-up? Do you have cash in Savings, Investments, or Cash Value in a Life Insurance policy? Do you want to borrow money from your friends or family? Do you have any untapped equity in your home? Do you have availability on your credit cards? Do you have someone interested in partnering with you? How about getting a grant?

Finding the proper financing for your business can be difficult. There are a few things to consider before moving forward. Your product/service that you are offering is going to match the type of financing that you receive. What I mean is, is that the higher the perceived risk, the higher the interest rate. In addition, know what the cost of borrowing does to your bottom line.

There are several sources of Capital you should explore: Traditional Bank Loans, SBA Loans, USDA Loans, Venture Capital, Retirement Plans, Angel Investors and Crowd Funding. All of these have upsides and downsides, so research them, thoroughly.

In the end, if your belief in your product and service is strong, then the cost of financing is all relative. Again, just because a traditional bank cannot provide financing, it does not mean that you have a bad idea.

Douglas Pratt is the President of Modern Capital Solutions, Inc.

Modern Capital Solutions, Inc. is a national commercial finance company that provides financing for all types of businesses. Visit us at: