Financing first steps: know what you're in for when it comes to financing your startup

Entrepreneur, Oct, 2005 by Nichole L. Torres

Startup financing is one of the most difficult hurdles for new entrepreneurs to overcome. We asked Jan Norman, author of What No One Ever Tells You About Financing Your Own Business, to share what she learned from the many successful business owners she interviewed for the book.

ENTREPRENEUR: WHAT DO STARTUP ENTREPRENEURS OFTEN OVERLOOK WHEN IT COMES TO FINANCING?

NORMAN: Writing a business plan. The middle section of the book talks about preserving the capital you do have. One of the things a lot of [entrepreneurs] told me helped them was to be very clear in a written business plan that actually spells out the budget. It helps them be more practical.

HOW DID MOST OF THE ENTREPRENEURS IN YOUR BOOK GET FINANCING?

NORMAN: Every entrepreneur I talked to was using multiple sources. They may have taken out a home equity loan or taken on a partner or tapped the resources of mom and dad. Especially in startup, every single person used their own capital in addition to anything else they [used]. If your dream is to start this business, and none of your own capital is in there ... I didn't find a single person for whom that was the case. If someone is going to loan you money or invest in your business, they expect you to have put some of yourself in that business.

IS THERE ANYTHING STARTUP ENTREPRENEURS WOULD BE SURPRISED TO LEARN ABOUT FINANCING?

NORMAN: Just how creative you may have to be might be a surprise. Some people might think 'Oh, I'll just use my savings,' but even people with substantial savings are probably going to tap resources that they never knew they had or never thought about. [But] I never found people who regretted what they did--they felt the business was worth it.