• Funding is different for start-ups and established small businesses.sad ben image by charles taylor from Fotolia.com
  
  Despite their similarities, start-up companies and established small businesses can be dramatically different when it comes to funding. Established small businesses usually have modest profits and rarely become huge money makers. Start-ups, on the other hand, often have lofty ambitions and the possibility of becoming huge businesses in the future. As examples, study what happened with companies like Google or Microsoft. Strangely though, it is often easier for an established small business to find funding than for a new start-up with lots of promise. If you are involved with either a start-up or an established small business (or are considering becoming involved in either) it is important to understand how funding is typically different for these two business types. There are a few basic differences between funding for these types of companies that you need to be aware of.
  
  

Source of Funding

• An established small business will usually have little trouble getting a bank loan if it has a good financial record. Banks are happy to lend money to an organization that has an established track record because it indicates to them that there is a strong likelihood of the loan being repaid. Startups, however, do not have a financial record to back them up. Banks will, therefore, be more skeptical of a start-up company. The typical funding sources of startups are referred to commonly as the "Three Fs": family, friends, and fools. These are all people who are likely to fund your venture, even if it is not a rational thing to do.
  
  

Collateral

• When an established business needs funding, it can often borrow against one or more of its assets. For example, a business that owns its own property can obtain a mortgage on that property. Equipment and stock are other things that established small businesses can often borrow against. Startups, however, usually do not have much in the way of collateral to offer. As a result, the owners of a startup are often forced to offer personal property (such as their own homes) as collateral if they need to obtain a loan.
  
  

Size of Funding

• An established small business can often get a large, lump sum source of payment from a loan or through investors. This is because they have an established business model that is shown to make profits. Startups will often find that their investors will make large investments, but in small increments. An investor may put in a small investment and agree to make regular investments so long as the business continues to grow and achieve certain benchmarks.