Start Your Search for Seed Money

There's one thing you can count on when you're starting a business: It will take more money to start it and take it to profitability than you think it will. Company graveyards are full of brands whose founders thought they had a great idea but ran out of money before it could get traction.

To avoid this fate, buff up your business plan and try to raise as much money as possible before your launch. It’s often harder to raise money once the business is going and encountering cash-flow problems. Start your search for seed funding here:

• Friends and family: Hitting up relatives and friends for startup cash is a time-honored tradition. Now the idea has gone high-tech, with tools that make it easier to keep track of who has lent you money and under what terms. Sites such as Virgin Money and Zimple Money offer tools for formalizing family and friend loans to help you keep it all straight, and help you avoid future disputes.
• Angel investors: These are wealthy individuals looking to make a high return by investing in promising startups. The Angel Capital Association offers a list of angel groups. There are many tactics for approaching angel investors. Try attending investor events to meet angels yourself, or get an introduction from someone you already know. Target angels in your geographic area, or angels you know are interested in your particular business sector. Using angel investors will mean giving up some ownership of your company. But it can be worth it, as many angels offer business expertise as well as dollars.
• Contests: If your business plan is in perfect shape and your idea is amazing, consider entering business plan contests. The Global Entrepreneurship Institute keeps a directory of these contests. Many are hosted by universities and may be open only to their students or local residents, but others are chartered by nonprofits and other organizations and are open to all comers.
• Peer lending: These days if friends and family don’t come through, you can meet more friends online. Peer lending sites, such as Prosper and Zopa, connect would-be investors with individuals and companies looking for money. You tell your story, and investors decide whether to lend to you and what interest rate to offer based on your idea and your credit rating. Loans can reach $25,000, and you can get more than one loan. Prosper has midwifed more than $180 million in loans since 2006.
• Bank loan: If you have a good credit rating and a solid business idea, you may be able to get a traditional bank loan from a local bank. Be sure to investigate loans guaranteed by the Small Business Administration; SBA backing makes banks more amenable to lending to startups. A previous history in business ownership helps here, along with collateral that can be used to guarantee the loan. If it's your first business, you'll likely have to sign a personal guarantee for the loan.

Business reporter Carol Tice contributes to several national and regional business publications.