Doron F. Eghbali Business Planning Law Blog on Lawyers.com

Unfortunately, start up companies with less than 3 years record of relative profitability are still hard pressed to obtain funding to expand or even pay their recurring business charges such as rent, equipment lease, employee charges, etc. 

PROBLEMS ABOUND FOR START UPS

This is, indeed, unfortunate and disconcerting to start up businesses, knowing practically all sources of funding is frozen. In other words, many small businesses rely on the following sources of funding:

• Family and Friends: This source has appreciably dried up since friends and families have their own problems to deal with whether that is their unemployment, lost home value or 401 K.
• Savings: Given the specter of unemployment and depleted saving accounts, it seems a risky proposition to tap into savings account knowing the business climate is uncertain and other funding sources are very hard to come by.
• Angel Investors: Angel investors are generally wealthy individual investors with an appetite for healthy risk. However, even they are experiencing cash flow problems of their own and as such are skittish to lend to a nascent business with no proven track record of profitability.
• Venture Capitalists: Despite what venture capitalists might assert, lending has not improved appreciably for young start ups with less than 3 years of proven profitability. Venture capitalists might fund an old business with lots of client or a
  relatively profitable product line; however, they will probably eschew start ups for fear they will lose money.
• Bank Lending: Again, start-up funding remains scarce and very hard to obtain from banks despite their statistics and other indicators.

The hard and disconcerting reality is that not much start-up companies could do to turn the tide. However, they might have a better chance at survival, if they prepare themselves by:    

• Writing a Business Plan That Works: This is extremely important to have a feasible and well thought out business plan. For tips on writing business plans, you could read my previous posting, Writing a Business Plan That Works.
• Not Launching a Start-Up Unless You Have Loyal Clients and Good Product: You should defer launching your start-up unless you have loyal clients already lined up and a relatively good product that experts tell you will be a hit.
• Doing Your Utmost to Survive This Economic Downturn for Another Two Years or So: This means you should get to work and devise strategies for the worst eventualities. Talk to your trusted expert friends and be extremely prepared.

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DORON EGHBALI is a Partner at the Beverly Hills Offices of Law advocate Group, LLP. He Primarily Practices Business , Rea l Estate and Enter tainment Law. He Can Be Reached at: 310-651-3065. For More Information, Please, Visit: HERE.