Entrepreneur’s Corner – The Santa Clarita Signal

April 18, 2012

“If you would know the value of money, go and try to borrow some.” — Benjamin Franklin

In almost every survey, access to capital shows up as one of small-business owners’ top needs. But capital is not a singular item;  indeed there are a wide variety of capital sources potentially available to small businesses.

In my next two columns, I want to talk about the various types of capital in the market, along with information about what sources are available to entrepreneurs today.

Ten years ago, entrepreneurs had access to a variety of capital sources. One of the most common sources was home equity lines of credit. Los Angeles home prices soared an astonishing (and unsustainable) 173 percent between 2000 and 2006, and lenders were rushing to lend money against those ever-increasing values.

At their heart, HELOCs are a form of asset-based lending, and provided a great deal of liquidity for those looking for capital to start or expand their businesses.

Another long-standing source of capital, for startups in particular, is family and friends, often referred to F&F (or sometimes FF&F). During that same period, incomes in a variety of industries were strong. This created opportunities for family and friends to invest $5,000 or $10,000 in a friend’s business to help them get going and allow them to be part of a new business.

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