One of the most difficult stages for a business to raise capital is when it needs it most. This is the initial stage when the prospective venture is little more than an idea and some committed entrepreneurs. Financing raised at this time is called seed money in reference to the fact that it is the first infusion that allows the company to grow.

To go beyond a business concept, market research, and product or concept development to reach the point of generating sales, an entrepreneur must be creative in the financing methods considered.

The following represent sources that businesses can access in raising seed capital.

• Personal Assets: This is generally the first resource that an entrepreneur utilizes. Evidencing commitment through personal investment is also practically a prerequisite to raising outside financing at later stages. Freeing cash from personal assets may involve liquidating savings, a temporary downsizing in lifestyle or sale of property or vehicles. An entrepreneur should, however, be prepared for all eventualities, including business failure, and should not place themselves in personal financial jeopardy to fund the venture.
• Borrowing Against a Home: It is very common for business owners to borrow against the equity in their primary residence. It is prudent to allocate a portion of the funds raised to cover the loan payments, rather than investing them entirely in the company, so as not to risk losing the home.
• Credit Cards: Again, a widely used option. For a small monthly minimum payment a comparatively large amount of funds can be borrowed. The downside is that payment delinquencies or defaults have a negative impact on the owner’s personal credit rating.
• Family and Friends: While opinions remains divided on involving personal contacts in business ventures, the reality is that friends and family are among those most likely to express interest and confidence in an entrepreneur’s ability. It is always advisable to document all funding arrangements in writing and structure repayment options for the capital provided rather than relinquish equity.
• Borrowing Against Insurance Policies and Investments: Borrowing against certain insurance policies, stock portfolios and retirement accounts can allow access to capital without liquidating assets and often with favorable borrowing terms.
• Leasing: If the company requires significant equipment or fixed assets, it is worth considering leasing. This removes the necessity for large upfront capital outlays, although does require meeting monthly payments. Equipment suppliers will often provide leasing terms to businesses at a time when bank financing is not available.
• Regional Programs: Many regions offer incentives programs to small businesses to help encourage business development. This might include access to micro loans, investment matching programs or tax credits. A business might also qualify for government loan guarantee programs that facilitate access to bank lending, often at favorable rates.

  Seed money is often quoted as being provided by family, friends and fools, but with the right founder using all financing resources available, nobody will be considered a fool to have backed a successful business.