Small businesses are the backbone of America and the dream of many entrepreneurs, however, just because several small businesses rise to the top of the industry and grow like wild fire, many fail. There are two main reasons small businesses fail. The first one is poor management and the second one is lack of funds. 

Before rushing out and starting a small business you will need to have a plan of action along with enough money for such things as inventory, office or building space, marketing, office or business equipment and so on and so forth. Even if you have enough money for all of these items, you may not have enough money to keep the business afloat until you begin to receive the funds to pay for all of your expenses. It takes time to get a new business off the ground and get the word out. You will need to look at ways to get funding to aid in starting up your small business.

Before you begin, your search for funding you will need to answer a few questions:

• Will you need a loan for short term or long term?
• When will you be able to pay back the loan?
• If you are looking for an investor, when will they see a return on their money?
• Do you need the money for operating your business?
• Do you need the money for items that will become assets to the company such as equipment or property?
• Do you need the money all at once or in smaller amounts spread out over many months?
• Are you willing to share all the risk in case your small business fails or would you like a partner that will also share in the risk?

Debt and equity financing

After you answer these questions, you will be ready to move forward on your quest for funding for your small business. There are two types of funding you can get for your business, which are debt financing and equity financing. Debt financing is when you borrow the money and pay it back usually monthly with interest. Debt financing is normally from your local bank. You will have to pay this loan back no matter what happens with your business. Equity financing means that you sell a portion of your small business for cash. Equity financing is what investors are and this means they will take on some of the risk of your small business. If your business fails, you do not have to give the money back, on the other hand if your business thrives then the investors will make more money as they own a portion of your business. 

Family and friends

You can borrow money from friends or family members or even have them help you as investors. Be sure before you take on investors of any kind that you have a contract in place to protect yourself. Before you talk with anyone about investing in your business or loaning you money, you will need a business plan together. This will show them exactly what you are talking about and why and how you believe in the business you wish to start.

Angel Investors

These are rich people that work as individuals in the sense that they are not tied to any bank or financial institutions but looking to invest in startups and small businesses in return for a predetermined share of the business or percentage of income generated by the business.