Unless you're independently wealthy, you'll probably face the most common (though hardly unsolvable) problem when you start up your business. That is securing a reliable cash flow and obtaining financing sources. Big questions and daunting procedures, such as "how do I apply for a loan?" or "what is a credit line?" or "what if I'm a victim of discrimination?" could discourage and frustrate the most enthusiastic of new business owners. But, they don't have to hold you back.

If you do your homework and are prepared for the inevitable difficulties of this complicated process, you'll be well ahead of your competitors. That's a good thing - - after all, there is only so much money to go around.

Where should you start?

A good rule of thumb here is to discount nothing (and no-one) in the preliminary brainstorming stages. Financing can come from a vast number of people and institutions, including your family and friends. However, in all cases, you should strive to make the process wholly professional and for obvious reasons always respect the money (and time) of others.

Helpful hint: It's best to pursue parallel funding from several sources, including your own savings, family and friends, potential investors and bank loans. So it makes sense to hire an attorney to help you with payback terms, or you can draft your own terms of agreement to re-pay any loans.   One thing is certain: Disputes over money can make or break a relationship!  So you'll also want to look as professional (re: prepared!) as possible, and an attorney can help you there.

Here are some more specific suggestions about where to start looking for the money:

• Personal Savings: Use your own savings to finance many up front costs. Saving up over the years can give you a head start and if available, is obviously the best option when looking for funding sources.
• Family members and friends. Here's a group of your most staunch supporters and loyal allies. These familiar individuals are far more likely to loan you money without interest and/or at a far lower rate than a bank. (You'd be surprised how many companies started with help from personal friends or family.) However, there also the same people who might take you a little less seriously, maybe they even knew you when you were in grade school. That's all the more reason to present them with a re-payment plan that's satisfactory along with a neatly organized business plan. You don't want to lose their friendship and loyalty.   It's best to approach your family and friends with a list of funding options. Don't play with anyone's money, including loans from your mother or father.  
• Angel investors or Venture capital firms: Be forewarned. These investors are usually more inclined toward large experienced businesses, but that doesn't mean they won't sometimes take a calculated risk on a Really Good Idea and an impressive new business owner.
• Finance Companies: According to the Small Business Association, finance companies are consistent backers of new small-sized companies.  Benefits of using a finance company include their flexibility and longer-lease times. They can also provide you with funding more quickly. On the other hand, finance companies charge much higher rates.
• Banks and credit unions: This route requires you to write an effective loan proposal. It's helpful to remember exactly what banks are looking for, so you don't waste time and you know what to emphasize in your application for loans.
  

In the next small business blog, we'll go into more detail on what banks and lenders look for when deciding to fund a new business venture -- or not.