4
C hAp t e r
Potential Sources of Money to
Start or Expand Your Small Business
Introduction ................................................................................................................................................................. 51
Ways to Raise Money ............................................................................................................................................... 51
Loans ...................................................................................................................................................................... 51
Equity Investments ......................................................................................................................................... 54
Loans and Equity Investments Compared .........................................................................................58
Common Money Sources to Start or Expand a Business ....................................................................59
Money From Your Personal Savings ......................................................................................................60
Friends, Relatives, and Business Acquaintances .............................................................................62
Creative Cost-Cutting ................................................................................................................................... 63
Equity in Other Assets .................................................................................................................................. 63
Supporters ...........................................................................................................................................................64
Banks ......................................................................................................................................................................64
Venture Capitalists ......................................................................................................................................... 67
Additional Money Sources for an Existing Business ...............................................................................68
Trade Credit ........................................................................................................................................................69
Commercial Banks .......................................................................................................................................... 69
Equipment Leasing Companies ...............................................................................................................69
Accounts Receivable Factoring Companies ......................................................................................69
Venture Capitalists ......................................................................................................................................... 70
Money Brokers and Finders .......................................................................................................................70
If No One Will Finance Your Business, Try Again .....................................................................................70
Secondary Sources of Financing for Start-Ups or Expansions ...........................................................72
Small Business Administration .................................................................................................................72
Small Business Investment Companies (SBICs) ...............................................................................73
USDA Rural Development ..........................................................................................................................73
