Banks have cinched up their belts. They simply aren’t as willing to finance large sums of money towards businesses as they were a few years ago. It’s for good reason. Bankers got careless and loaned money to people they should have known wouldn’t be able to pay it back. Overnight success stories are rare, and banks should know that. They’ve learned their lesson, so they may not be willing to invest in your new business idea. You may need to consider private stock holders as an option.
If you need $50,000 to open your new small business, and the bank is only willing to loan $20,000, where do you get the extra financing? Seek out private stock holders. In order to do this successfully, you’ll need to develop a clear, workable business plan. A great idea is not enough to sell anyone on giving up cash to finance your venture. They need to know you have a systematic, well thought out approach to building your new venture. If outside parties don’t seem willing to finance you, then think about employee stock options. Are there people who are willing to invest as co-owners of the new business?
However you create your financing plan, be sure that you don’t make your stock revenues so far fetched that you wouldn’t be able to meet your obligations should the business fall short of projected profits. In other words. you better be super sure you can make this idea work and profit. Opening a business on a whim or because it’s a lifelong dream does not substitute for good solid financial and management practices.