Besides a lack of expertise, a shortage of money is the 2nd major reason why small businesses fail. With this in mind, we explore some sources of funding and new approaches to finance your startup or existing small business.

There seldom is a shortage of new ideas for products and services. However, cash or credit to get things off the ground is another matter. We offer some ways to help you raise money to test that new idea or to improve/expand your business.

Obama Adminstration steps in
U.S. President Barack Obama will announce steps on Monday to make it easier for small business owners to borrow money, using $730 million in stimulus funds to cut lending fees, boost loan guarantees and expand other programs, officials said. See announcement.

Don’t quit your day job
Small business owners should be frugal and risk adverse. We think that a steady family income and benefits along with the peace of mind should bring be strongly considered in any launch or business expansion. You or your spouse or that special person in you life should keep that day job.

Try to test out your product and service at night, weekends and on holidays. Instead of taking a vacation, use the 2-3 weeks that you have coming to launch that business and see if it takes off.

If you do quit your job, ask your ex-employer for contract work, especially if you are going into an business that makes use of your existing job skills and knowledge.

Consider using savings, credit cards in moderation, and tapping friends and relatives for money
If you have savings and really believe in your product and service, nothing will show that conviction to others than investing your own money in your idea. Many people do this, but friends and relatives are still not willing to provide you their hard earned cash. Think of these friends and relatives as potential investors and even if they don't provide some cash, practice presenting your business pitch on them. You can use it on others.

We suggest to put together a 10 slide show PowerPoint Presentation with the following topics which is modeled after The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything. He recommends using a 10-20-30 approach. That translates to a maximum of ten slides, in a 20 minute presentation and using a large 30 point font size. Here are the list of page topics:

1. Title Page (name of your business),
2. The Problem or Pain you are trying to solve or relieve,
3. Solution that will eliminate the pain,
4. The Business Model- how you will make money, include major customers,
5. The Underlying Magic of your product or service,
6. Marketing and Sales,
7. Your Competition,
8. Your Management Team and their strengths,
9. Key Financial Projections and Metrics, and
10. Current Status and What you have accomplished so far.

The idea here is get the main points across to your friends and potential investors and allow them to ask questions.

Consider a government grant
Grants are nice because they normally don’t have to be paid back. Start by Searching for Grant Opportunities with the Federal Government. The Feds have consolidated everything in one place so it should be easier to find opportunities and to apply for grants. You’ll be able to search by categories and by agency.

SBA Loans for Small businesses
The Small Business Administration (SBA) offers a variety of loans to small businesses.

We suggest that you first consider a Microloan if you are very small. These are short-term loans of up to $35,000, but generally average $14,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. Proceeds cannot be used to pay existing debts or to purchase real estate. Funding is provided by local funding agencies.

The SBA also offers several other loan programs. The loans are actually made by banks and other organizations and the SBA acts as a guarantor. You can start with the bank where you have set up your business checking account. In fact, you should ask your bank whether or not they lend to small business. This could be an important criteria in selecting the bank where you will do business.

Here are the highlights of the SBA loan programs including the Pre-qualification Program.

To wrap things up we’re providing the most requested items on the SBA website. This should save you a lot of time, which you will quickly learn, you never have enough of.