Because of our banking environment, small business loans are difficult to obtain for businesses that have less than two to three years of successful growth. For this reason, many new entrepreneurs have to rely on personal savings and credit to launch their business.
Be aware that jumping too deep in personal debt is a bad idea. A large number personal bankruptcies are caused by small business failures. As a business owner, you need to become adept at measuring the potential risks of debt against all the possible outcomes of your venture. Going into business for yourself should never be a gamble. Understand the risk and do everything possible to mitigate them using sound logic and objectivity.
Borrowing from family and friends is another option to consider, but be careful since these types of loans can destroy relationships. Plus, once money is loaned, many people believe that gives them an implied say-so in how you run and manage your company.
The US government’s Small Business Administration (SBA) is one potential source of financing for your new business. You should be aware though that the SBA does not make direct loans but instead guarantees loans made by an approved funder. Most larger commercial banks have SBA specialist on staff to assist entrepreneurs with applying for an SBA loan.
Some grants are available for start-ups, but they are rare and usually available to only certain disadvantaged groups or targeted and specific community needs. Be very cautious when approached by anyone offering a grant since unfortunately it is often a scam.