Insufficient or badly timed financing is the second most frequently cited reason why businesses fail, close behind poor management. There are two types of financing: equity and debt financing. You should probably seek debt financing if your firm has a high ratio of equity to debt. However, if the opposite is true, experts advise that you should increase your ownership capital for additional funds.

While the old saying it takes money to make money has some bearing on starting a business, how much money its going to take depends on the kind of business youre starting. You must make an educated guess about the costs of your business for at least the first several months in order to find out how much seed money you will need. To determine your startup costs, you must identify all the expenses that your business will incur during its startup phase. Strategies for securing financing to get your business off the ground can include:

Strategy 1: Secure a Bank Loan

Banks have supplied the small business community with financing for decades. A good rapport between you and your bankers allows for the free exchange of information and the ability to meet the needs of business. A banker informed of your business can offer sensible advice on financial matters. Setting up a relationship with your banker begins with following a few tips:

• Set up an account at a bank that deals with your size and type of small business
   
• Handle the account efficiently and avoid overdraws, bounced checks, and low balances
   
• Take a short-term loan and pay quickly to create your business credit
   
• Keep your bank informed of upcoming issues, missed projections, and skipped payments
   
• Get to know your bankers and help them understand your business.

Consider applying for a personal loan, such as a home equity loan, if youre unable to get a commercial one. Even if you can get a commercial loan, a home equity loan can provide supplemental funding. Lenders generally wish to see an investment of your own money, and a home equity loan can help to provide this capital. A home equity loan should only be used for short-term financing (1 year or less). Home equity loans are typically variable interest rates that fluctuate with the prime interest rate, so you dont want to be stuck in a situation where interest rates are rising for long periods of time.

Strategy 2: Find an Angel Investor

While the majority of angel investors are paying attention to businesses that already have a track record, if you have a hot, pioneering proposal, you may be able to interest a wealthy person in your community, like a doctor or a group of doctors, to invest in your venture.

Finding an angel is time consuming, however, if your business is just an idea in need of seed money, this type of investor is not yet for you. Its advisable to wait until youve used up your own funds and before looking for an angel. Once youve perfected your marketing and business plan and youre confident you have a viable product, consider approaching individual investors or an angel group.

Strategy 3: Borrow From Yourself

If you have a 401(k) plan, you may be able to borrow against the money you have been contributing. There are several benefits of 401(k) loans:

• Fast approval.
• Attractive interest rate.
• No restriction on how you use the funds.

You can usually borrow up to $50,000 or one half of your contributions and vested employers contributions: whichever is less. You typically have to repay the loan within five years. Its going to hurt if you fail to repay your loan. The unpaid balance will be treated like a distribution from your plan, meaning youll have to pay income taxes on the amount and, in most cases, a 10 percent early withdrawal penalty.

You can expect to face some obstacles on your way toward gathering financing, but dont let that stop you. Financing is available to those who persevere, and remember: persistence pays.

Strategy 4: Bootstrap It

Ultimately it would be nice to launch a business venture using no money. This type of bootstrapping a business start-up is always a possibility and should be considered. Many successful businesses have been launched starting with little to no money.

For more money strategies, be sure to receive a FREE subscription to FREE MONEY TIPSThe Worlds Leading Money Strategy Newsletter. You can receive this and other valuable help by visiting http://www.TheMoneyExpert.com.

-Jim Guarino, CEO of http://www.TheMoneyExpert.com