Idea Phase

Personal Savings Funds 

Entrepreneurs can utilize their savings to help fund their business endeavor, otherwise known as "bootstrapping." Before using personal funds, consider the following: 

• Can you afford to lose personal funds?
• Are you putting your dependents or loved ones at risk by using personal savings?
• Do you have outstanding personal debt or other liabilities that must be addressed?
• How do you plan to replenish savings if they are lost or the business fails?
• Will you be able to manage the emotional toll of losing your savings? 

Friends, Family, and Fans Donation Campaigns 

Soliciting family members and close friends for donations is a common starting place. Before making donation solicitations, consider the following:

• Do you have a good network of family and friends willing to donate to your efforts?
• How will soliciting donations affect family and friend relationships?
• Will your donors expect ongoing communication and reporting?
• Can you afford additional time and effort to conduct a donation campaign?

Personal Retirement Funds 

Some employer-provided and personal IRA funds offer tax-sheltered withdrawals for business endeavors. Before tapping into personal retirement funds, consider the following: 

• How will this affect your future financial or retirement goals?
• Are there tax liabilities that may be incurred?
• Are there repayment terms you need to keep in mind?
• Have you consulted a financial planner? 

Borrowing from Insurance Policies 

Some life insurance policies offer loan capabilities that entrepreneurs may be able to access to finance initial business costs. Before requesting a loan from your life insurance provider, consider the following: 

• Do you have an appropriate policy that allows for borrowing? 
• Do you understand the terms of the loan? 
• How will this affect your financial plan and beneficiaries? 
• Do you have a plan to repay the borrowed money? 
• Are there tax consequences that may be incurred? 

Research and Business Grants 

Various grant funding opportunities are available from state and federal governments and some private organizations. Most grants are directed towards non-profit organizations and organizations conducting research and making innovation efforts. Before applying for a grant, consider the following: 

• Do you understand the terms and requirements of the grant? 
• How must the grant funds be utilized?
• Do you have the additional time and effort for the application and reporting requirements?
• Does the grant align with your business plan?

Personal Credit Cards 

A personal credit card can be used to finance initial up-front costs.

Before using your credit card, consider the following: 

• Can you afford to pay off the credit card balance in a timely manner? 
• Are you willing to have your personal credit score affected? 
• Do you have a good credit history? 
• Do you have a plan for separating personal charges from business charges? 
• Do you have a business bank account established?

Business Credit Cards 

Business credit cards can help finance initial startup costs and offer perks or terms conducive to business operations. Before using a business credit card, consider the following:

• Do you fully understand the terms being offered? 
• Are you willing to have your credit score affected? 
• Do you or the business have a good credit score and credit history?
• Has the accounting infrastructure for your business been established? 
• Do you plan to have multiple credit cards, i.e., for your business employees? 

Personal Lines of Credit 

Financial institutions offer lines of credit to entrepreneurs to help finance initial business costs. 

Before applying for a line of credit, consider the following: 

• Do you have a good credit score? 
• Do you understand the terms of the loan and repayment schedule?
• Do you have the appropriate qualifications for approval?
• Are you willing to have your credit score affected? 
• Has the accounting infrastructure for your business been established? 
• Will your business be able to afford to repay the loan timely?

Home Equity Loan and Home Equity Lines of Credit 

Home equity loans, or "second mortgages," are lump-sum loans issued by financial institutions that use the borrower's equity in their home as collateral. A home equity line of credit (HELOC) is a revolving line of credit issued by financial institutions that uses the borrower's equity in their home as collateral. Before you borrow against the equity in your home, consider the following:

• Do you have sufficient equity in your home to borrow against it?
• What are the consequences of defaulting on a home equity loan?
• Do you understand the terms of repayment? 
• Can you afford to take on additional debt? 
• Do you have a good credit score and credit history? 
• Are there additional costs and fees?

Early-Stage Community Business Loan

Some lenders partner with state or federal government community programs to offer loans to qualifying early-stage businesses. Often, these programs have specific eligibility requirements and are designed to provide access to startup capital to underserved communities. Before meeting with a lender regarding an early-stage community business loan, consider the following:

• Can the business afford to take on debt?
• Do the projected financial statements reflect the ability for the business to repay the loan?
• Are you willing to have your credit score affected?
• Are you willing to offer personal assets or a personal guarantee as collateral for a loan?
• Do you have a business plan and financial projections to share with potential lenders?
• Will defaulting on a loan affect the performance of the business?

Investment Crowdfunding 

Investment crowdfunding is raising a small amount of capital from numerous non-accredited or accredited investors. Some types of crowdfunding are regulated by the SEC or state securities regulators while others are not. Before conducting a campaign, consider the following: 

• What type of crowdfunding will the company conduct?
• How much is the company seeking to raise?
• What are the funds to be used for?
• Is investment financing appropriate for the business's long-term growth plan?

• Can the business afford the operational and transactional costs associated with crowdfunding? 

• Can the company afford the additional time and compliance efforts associated with crowdfunding? 
• Can the company afford legal and other professional fees associated with crowdfunding? 
• Can the company afford to manage a large number of investors and investor expectations? 
• Does the business have a consumer or online following to market the offering to? 
• Will the company use a third-party platform and if so, what platform?
• Is management willing to surrender equity in the company? 
• Do you understand the future implications of equity dilution in the company?

Angel Investors 

Angel investors are high net-worth individuals who invest early in business endeavors in which there is a high-potential for success. Angel investors will typically want to see financial statements showing revenue flow and the potential for future profits. Before seeking capital from angel investors, consider the following:

• Is investment financing appropriate for the company’s long-term growth plan?

• Can you afford to provide investors with offering updates and financial reports?

• Are you able to facilitate shareholder meetings and handle investor input into company operations?

• Are the company owners and board of directors willing to surrender equity in the company? 
• Has the company considered the future implications of surrendering equity in the company? 
• Is the company prepared to comply with the securities laws and applicable reporting/disclosure requirements?
• Can the company afford the legal cost of raising investment capital?
• Does the business performance or initial market research reflect revenue flow and the potential for future profits? 
• How will the company plan provide liquidity to investors? 
• Does the company have a viable exit strategy?