How to Get Money to Start a Business

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Cover Courtesy Storey Publishing
Get practical advice on starting a creative business in “Grow Your Handmade Business.”

Expand your business beyond the dining room table with the coaching of Grow Your Handmade Business (Storey Publishing, 2012). Author Kari Chapin shows you the nuts and bolts of starting a business, from mapping a business plan to addressing legal issues. In this excerpt from chapter 18, “Money and How to Get Some,” find out how to get money to start a business.

You can purchase this book from the MOTHER EARTH NEWS store: Grow Your Handmade Business.

If you are considering getting a loan for your business, you have some options. Banks, grants, family members, angel investors, and community resources are all legitimate paths. As you decide who you want to approach, take note of what their requirements are for requesting money. Different institutions and different people may want different information from you.

How to Get Money to Start a Business: Bank Loans

Let’s start with banks since they’re the most common way to get money for any business. Banks are actually pretty easy to work with. I don’t mean it’s always easy to get money from them, but dealing with them is very straightforward. First of all, banks want to lend you money, and they are very clear about what you need to do to apply for a loan.

Make an appointment to speak with the loan officer at the bank where you have your business account. Show up prepared, knowing exactly what you want the bank to do for you. Do you want a loan for equipment like new ovens or industrial sewing machines, or do you need money to renovate your working space? Do you need a line of credit to buy whatever your business might require over the next two years? Be really clear about what you want the money for and why. Be prepared to talk about your business and to answer any questions that you think may come up. Make sure that you can expertly explain just what it is you do.

Bring a list of questions regarding applying for the loan, including how long the process can take because the time it takes for approval can vary greatly from bank to bank. You should walk out of this meeting knowing anything and everything that the bank will want from you when it comes time for them to make a decision about lending you money. In fact, ask for a loan application so that you can see what questions you’ll need to answer. And ask the loan officer if the bank has any local resources or organizations that they work with when it comes to lending money to small businesses. Once you have all this information, get to work applying for the loan.

Which Bank Should You Bank On?

Not sure which bank you should open an account at or apply for a loan with if you don’t already have a business banking relationship established? Contact your nearest Small Business Administration office and ask them which local lenders are friendly toward small-business owners. Most SBAs are on excellent terms with at least a few banks and lenders, and they will gladly point you in the right direction.


In the United States, grants are available for any number of purposes. You can search for local, state, or national grants at your local library or online. To apply for a grant, find one that matches your needs and simply submit an application. Grant applications come with guidelines and are usually pretty straightforward about what is expected from you. If you are awarded a grant, it usually comes with stipulations like how long you have to complete the project and maybe even parameters about what you can do with the money once you receive it. Make sure you can comply with these guidelines before accepting (or even applying for) the money. Grants are highly competitive, and if you win one, it means others have lost out, so be sure that it’s a good match for you. Plus, applying for a grant takes a lot of effort, and if you don’t truly agree with the stipulations of the grant, don’t waste your time going through the application process.

Grants are an especially excellent source of funding for artists of all stripes, from painters to printmakers to photographers to writers. If you make large-scale works, like bronze sculptures or murals, applying for a grant is a great way to have money for your project and get exposure, as well.

Grant Writing

Writing a grant can be daunting, but you can get help. Lots of professional grant writers are employed by nonprofits, and most of them work as freelancers on the side. Check Craigslist and see if anyone near you is offering their services. If not, post an ad seeking help. Most freelance grant writers take a cut of the grant money awarded, and you can work out a fee that suits you both. You can also suggest bartering for their services if you create something the grant writer might be interested in. A painting or handmade goods in exchange for a professional writer’s skills might satisfy both parties! In any regard, getting professional help with winning a grant is an excellent investment.

Angel Investors

Angel investors are groups of people (or in some cases, one person) who pool their money to support business ideas. Most angel-investor groups work with large sums of money, but smaller investment groups are becoming more popular, and many of these like to keep their investment dollars local.

These groups (or individuals) work in lots of different ways, so be sure you know that the angel(s) you’re approaching fits well with your business and you personally. Sometimes you pay the loan back, and sometimes the investors take part ownership control and get paid back through your profits.

How to Get Money to Start a Business: Crowd-Funding

Not so very long before I decided to write this book, a new trend in raising money for businesses and creative ideas came onto the scene: crowd-funding. Anyone can utilize such websites as Kickstarter or Indiegogo (where you ask for money for your business and don’t pay it back). So the possibility of securing some money for your big idea has never been easier.

I am a huge fan of crowd-funding, and if I was looking for money to fund a project or equipment to make my business run smoother or a way to raise money to record a CD or pay for the one class that could change everything, it would be something I would try. The premise of crowd-funding is you simply ask the good people of the world to fund your dream. You tell them what you want to do and why it’s not only important to you but also the effect it will have on your community and the world at large — and then you ask them to support it with their dollars.

Family and Friends

Sometimes borrowing money from family and friends may seem like your best and possibly only option. However, with that in mind, I caution you against doing it if you have any other choices.

First of all, owning a creative business is an incredibly personal thing. Creativity and artistic expression don’t follow any kind of rules or formulas. Creative people are generally in business for themselves because they have a calling. Something wonderful inside compels them to create, to share their ideas and their visions with the world. These amazing folks are not all about the money and are usually not looking for a way to earn money that simply boosts their bank account — although of course that is welcomed! When you’re putting your heart and soul and your own dollars plus all your hopes and dreams into your business, and your very happiness hangs in the balance of it being successful or not…well, sometimes it’s best to leave people who are close to you out of the equation if possible.

These are not anonymous funding sources; they are the people who care and love you the most in the world. Their only desire is for your success and happiness, and if you take money from them, you have to be willing to invite their advice and criticism along with their checks.

And if you change business directions or don’t use that pricey piece of equipment you borrowed money for as much as you originally thought, you may have some explaining to do at the family reunion. However, a banker will never know if that vintage letterpress has gotten a wee bit dusty.

If, after taking your personal-relationship dynamics into consideration, you still think that approaching someone you know and love for a loan is the very best idea, do it in the smartest and most professional way you can. If you begin this new phase of your relationship in a serious and businesslike manner, you may be able to set the tone for this aspect of your relationship.

Present your chosen lender with a business plan that will assure them that:

• You’re an expert

• You’re a professional businessperson

• You’re a good and trustworthy candidate for their money

• You take your business very, very seriously

Be extremely direct and clear with your request and your expectations. Take this money-lending relationship very conscientiously and be open minded when it comes to payment terms and interest rates. Listen carefully to what your investment partner wants and thinks. Answer all their questions and make sure you ask any questions of your own. Go above and beyond to instill utmost trust in you and your ability to use their money wisely, and treat their investment with the utmost respect.

If someone you know personally lends you money to further your business, it’s not just because you have awesome skills and fantastic ideas; it’s mostly because they believe in you, they believe in your dreams, and they want you to be happy and successful. Plus they think you have awesome skills and fantastic ideas. . . .

Financing with Personal Credit Cards

We’ve all done it, and most likely we’re all gonna do it again at some point: you’re going to whip out a personal credit card to pay for a business expense. Maybe it’s for an emergency purchase, or maybe you forgot about an alternative payment method, but quite possibly it’ll be because it’s your only option.

Using credit cards to pay for monthly or weekly expenses can be risky, and if you can avoid it, please do. Just as your personal credit card debt can quickly add up, the same goes for your business spending — and if you’ve spent your credit on your business, it may not be there when you need it for personal expenses.

Sure, there are lots of wonderful stories out there in the world about people who’ve accomplished amazing things by only using credit cards as their funding source. So it’s not that it can’t be done. It’s just that it’s risky.

If you do need to rely on plastic to make purchases, here are a few things you should be aware of:

Know what your charge cards are really costing you. What are the terms of your card, and what are the interest rates? If you can, try to negotiate a lower rate with your credit card company. If you’ve had your card for some time and you’ve always paid your bill on time, or if you pay a bit extra toward your balance each month, simply call them up and let them know that you’d like a lower rate. If they can, they may lower it for you. It’s a good idea to know what your lowest rate is on your cards because sometimes lenders will ask you what sort of rates they’re competing with, and you’ll want to be able to answer knowledgeably.

Know if you’re rewarded for paying balances off by a certain date. Do you earn points toward something useful like air miles that could help get you across the country for craft fairs or trade shows? If so, use that card to your business’s advantage.

If at all possible, don’t use your cards to get cash. The interest rate and penalties for missing a payment can be even higher for those tempting cash advances. If you have to do it, know what that rate is and then calculate how much it is going to cost you in cold hard cash to pay back that cash advance. You may be surprised and then motivated to find a better way to get what you need.

Know if your credit card carries warranty options. If you can score extended warranties on big-ticket items like a computer through your credit card company, then using one may be in your business’s best interest, but make sure you understand the conditions before you buy.

Finding a Way

No matter the state of your financial affairs, you can do this. Lots of businesses that started with nothing, or next to nothing, are now great successes. There is nothing out there that says the same can’t or won’t happen for your business. If you’re feeling low because of dollars, or a lack thereof, try to spend some time focusing on the parts of your business that don’t require your wallet at the moment. Look at your marketing plan again, organize your supplies, or try out some new social media strategies.

Remember, some of your most valuable skills have nothing to do with your bottom line. Your creativity and ability to dream and shape your future aren’t a reflection of what’s in your business bank account. Take those skills and use them to the fullest. Give yourself enough space and time to get your work done. Take care of yourself. Give yourself breaks, both emotional and physical, when you need them. And if you hit a rough patch, reach out to your community. Celebrate your successes and be proud of what you’re accomplishing. Keep in mind how amazing you are.

Focus on how you want your business to make you feel, and then let the rest take care of itself. You’ve got things that money cannot buy and lack of money cannot stifle.

Creative Thinking: How Did You Get the Money to Start Your Business?

Securing financing for your business is a pretty important detail. After all, most businesses need at least some money to begin with, even if it’s just to upgrade your computer or buy that first hunk of clay to throw on your wheel. There are as many ways to get funds as there are things you need funds for. Your naturally creative thinking skills can really help you with this, so don’t leave any stone unturned or any viable possibility overlooked. Here’s how some of the Creative Collective members financed their business dreams.

“I started my business when I was 23, after my very first juried art show. It was a major success and an eye-opening experience that led me to realize that I could make a living as an artist. I’ve always been good at saving money, so I used what savings I had to live off of while I was preparing for that first show (I’d quit my job as a waitress to focus on painting), and then it all started snowballing after that. I entered more shows and was very successful in the beginning, so it sort of funded itself. Plus, I was 23 and didn’t have tons of expenses yet!”
— Jessica Swift

“I have always been good at saving, and when I started my business, I realized that this was the ‘rainy day’ I’d been saving for all along, that this business was a worthy cause to dip into the savings.”
— Jessie Oleson

“I don’t believe in carrying debt, and thankfully my business required very little to get started. Just supplies and a blogspot. As things sold, I paid for a professional site design and bought a fancy printer, but there was very little overhead in the beginning. Now I have my own studio and equipment, but I began by bartering, borrowing, or getting creative with what I already had.”
— Jolie Guillebeau

“I worked full-time and then part-time until I got to the point where I was making enough at my art and illustration work to become a full-time artist.”
— Lisa Congdon

“I applied for all of the college scholarships I could, went to the school that gave me the most money, graduated without debt, and saved every penny to reinvest in my business. Growing slowly enabled me to manage the cost of overhead, and I didn’t hire employees until they were necessary to continue on my growth trajectory. I think I have an irrational fear of business loans and investors. I just hate owing money.”
— Megan Hunt

“Since my business is service oriented, I didn’t have any traditional start-up costs in terms of renting a workspace or buying materials and so on. Frankly, I simply scrabbled and saved for about six months at my 9-to-5 gig to ensure that I could comfortably coast for a spell if the clients didn’t come a-knockin’ right away. Just before starting my entrepreneurial adventure, I invested in a twelve-session package with a stellar career coach named Michelle Ward. I wanted professional guidance, hand-holding, accountability, and heartfelt support — quitting your j-o-b in the midst of the Great Recession ain’t no cakewalk, after all! Michelle was a rock star, and I’m forever indebted to her brilliance. I also invested about $2,500 in a professionally designed website and blog, which elevated my online presence (and client attraction) dramatically.”
— Alexandra Franzen

“For my current business — a digital, work-from-anywhere one — I earned the minimal start-up costs by doing client work that I carried over from consulting less ‘officially’ while I was closing my first business (a brick-and-mortar retail shop). I feel wildly blessed and tremendously smart that my current business can be run quite low cost.”
— Abby Kerr

“I funded my business from the tiny — and I mean tiny — bit of extra from my husband’s paycheck for the first couple months of my business. I also put some minor expenses on a personal credit card. I took a lifestyle loan from our credit union to bankroll the purchase of an existing business. The monthly payments and interest were clearly going to be more than covered by the extra revenue this business would generate for me.”
— Tara Gentile

“Giant Dwarf started from a sweater folded neatly in my closet. I decided to reconstruct it into my first Fleurette Cloche and sold it right off my head. Beyond that, I only spent what I had from my other job at the time on supplies until I was able to create a nest egg from sold items. I knew I didn’t want to get a small-business loan, so I had to be really smart about how I spent my money.”
— Sue Eggen

“For the first year or two of running my business, I was pretty much bootstrapping. I’d go to a show, sell things, and then invest that money back into running the business. But in late 2008, I made the decision to attend a big trade show and didn’t have the funds to afford it on my own, so I took out a line of credit at a local bank. I combined that with a business credit card to really help fund my business when things were slow in 2009. Now, I’m back to making sure my business is self-funding.”
— Megan Auman

“I worked a full-time job and slowly built my business in the evenings and on weekends. Over time, my full-time job became a part-time job, and then I was able to quit once I was able to consistently make enough monthly income from my business.”
— Kelly Rae Roberts

Read More: Learn more about starting a creative business in Creating a Budget for Your Business.

Excerpted from Grow Your Handmade Business © Kari Chapin, used with permission from Storey Publishing, 2012. Buy this book from our store: Grow Your Handmade Business.