MANILA, Philippines —  A critical factor that stops most would-be entrepreneurs in their tracks is the lack of funding for starting a business. Raising the required capital rates is one of the most daunting, discouraging and tedious activities that an aspiring entrepreneur will have to face.

This activity often rudely strips the aspirant of the first blush of passion for an entrepreneurial venture, killing most ideas before they’re even birthed.

If you’re about to start a business, get a reality check on where you’ll most likely get your funding source so that you can focus your energy on getting the capital from the most likely sources. If you have no existing business, here’s what to avoid:

•SME Funding institutions. At first glance, this sounds crazy. These financing institutions have the mission to develop small and medium enterprises; in fact, that’s their reason for being. Unfortunately, if you have no business to show, you won’t get any financing. These institutions normally support only entrepreneurs with assets, equity and collateral (no matter the variant) to show—in short, only those that exist and are able to show the business’ viability. If you’re a startup, you’re not even in their radar or their realm of universe yet.

•Banks. Banks seem the likeliest candidate because that’s where cash practically lives. But banks are in the business of managing risk and not getting their necks out for nothing. If SME funding institutions want you to show some tangible evidence, banks have to be assured that default is practically impossible—the possibility of which, unfortunately, is too high for a startup that has no track record of survival. If you have no assets you’re willing to lose and guarantee in favor of the bank, you’ll be back to square one.

•Rich investors not interested in your line of business. When the above potential sources are readily acknowledged as inaccessible, the often default idea is to find someone—anyone—with a reputation for having the dough. True, the rich man may have the capacity to fund the seed capital, but if he personally finds no match between your proposed business and his own interests, forget it. A man who got rich on his own right means he was good at what he did, as evidenced by his level of wealth. If you bring him to unfamiliar ground, this would seriously challenge what he knows he’s good at, and therefore, reduce his interest of funding your venture. An investor might put his money in new businesses but you should be able to explain and relate it to how the investor essentially approaches his own business interests. Approaching a potential rich investor without doing research on his own business interests, his stage in life, and his general approach to doing business is a deal killer. You’d be better off prying money off a dead man.

•Credit cards. Credit cards have been written up in literature as a great source for short-term capital. In credit card lingo, this period is one month. Exceeding that period by paying the minimum balance means paying for funding at rates you can’t assume at this stage. If you’re a startup, getting into this critically short funding period without the equivalent guarantee of covering it is financial suicide. Credit cards are wisely used when you know that you already have the cash in the bank or are sure that it will arrive by the next pay date. The obligation and the capacity to pay are equally balanced. If your guarantee is the forecasted revenue you will generate from the business you’re just about to build—sorry but again—forget it.

Find your starting capital from what you already have. Examples are as follows:

•Personal savings. You have to at least have some cash to spend as you build the business. Even if you find someone who will fork out the initial working capital, you will be reaching into your own pockets for all the preparatory work to sell the idea in a viable form (e.g. professional proposals, prototype, corporate identity, etc). If you come in without any money or have undertaken some prep work in building the semblance of a business, it will be a hard climb. If you don’t show some skin, people will think you’re not that interested in your proposed business to risk your own money.

•Your warm circle. Friends and family love and support you. They’re your litmus test to check whether anyone outside of yourself will actually fund your idea.

•Suppliers. As a credit source, they provide one of the best—what you need when you want them. If you make them a preferred supplier or guarantee specific terms or rates over competition, you may be able to get what you need for your own business without shelling capital from day one.

•Profits from your business. Fueling your business with its own profits might be a slow climb but this is indubitably a sound strategy. Keep your hands off the cookie jar and instead, plow back as much money as you can in building the business. By the time you get around to external financing, others will see how much you’ve vested in a steadily growing business and would be enthusiastic to lend you more capital.

Evangeline, a.k.a. Girlie, Navarro is a serial entrepreneur and investor, a finance teacher; and a student at heart on how money and resources affect people. She can be contacted at evangeline.navarro@gmail.com.