Financing sources for startup businesses.

• Author: Shepherd, Connie
• Position: Indiana: Small Business Reference Guide - Brief Article

Thinking of starting a new business? Terrific! While you may have heard lots of statistics about how the odds are stacked against you, you shouldn't be dissuaded. Hundreds of thousands of new businesses are started every year--and if you have a marketable product or service and a solid business plan, there's no reason you can't join the millions of entrepreneurs running successful companies in the U.S.

In fact, for many potential entrepreneurs and small-business owners, the biggest challenge isn't having a great idea or drafting and executing a business plan. Rather, it's securing the financing needed to get their venture off the ground.

TYPES OF BANK FINANCING

Many banks today offer several different loan options for small businesses that need relatively small amounts of capital, such as under $35,000. Keep in mind that if you are a startup entrepreneur with little or no business history, your bank is going to place a heavy emphasis on your personal credit history.

The most common bank loan options for startup businesses include:

* Business credit cards--If you have good personal credit, you can probably secure one or more cards with credit lines of $5,000-$10,000 or higher. Of course, you can also use personal credit cards to raise business cash, but business cards usually offer a lower interest rate plus the added benefit of management reports that can help you track your business expenses more carefully. And using a business card helps you keep business expenses separate from personal expenses. Another benefit: Some business cards allow you to earn airline frequent flyer miles with purchases.

* Unsecured small-business line of credit--Again, with a strong personal credit rating, you may be able to receive an unsecured credit line. You can access your credit line (simply by writing a check or using a credit card) for any business purpose you choose, and you usually have the flexibility of making minimum interest-only payments each month, which can help ease cash flow during tight times.

* Business home-equity line of...