One of the best things about micro-businesses is the low start-up cost. If your business idea needs a lot of start-up capital there is a good chance you haven’t thought it through really well or it’s not really a micros in the first place.

Generally, it’s best to finance your micro-businesses with your own money. Since we’re looking at an average start-up cost of about $500 almost everybody can come up with it somehow. If you can’t, put that idea on your Future Ventures List and find one that you can start for less then use the money from that to start the more expensive one.

I encourage you to avoid borrowing money at all to start your micro but especially from family and friends. It’s so easy to damage relationships by involving money with them and frankly it’s just not worth it. If you go to a bank to borrow money for you micro-business one of two things is likely to happen — they will flip you a credit card application or tell you that a business can’t succeed when it’s started with that kind of money. If they tell you that your business isn’t feasible I recommend you find another bank because this one is not likely to offer you the kind of support you need. If they give you a credit card application I recommend you don’t fill it out — chances are you have too many already.

There are some banks and business incubators which offer SBA backed microloans. These loans provide a maximum of $35,000 but the average is about $13,000. The maximum term is 6 years but the actual term is determined by the lender based on the eventual use of the proceeds. The interest rate is generally around 8-15%. The personal guarantee of the borrower is almost always required — meaning you will be responsible for the debt regardless of the business entity you are using and the business is unable to repay the loan.

As a final word of caution: I advise you against using debt to finance a micro (Have I made my stance clear enough on this subject yet?). There are so many opportunities that require little or no start-up capital. Use the profits from those to fund ventures with higher start-up costs or rethink the venture to see if there is a way to lower the capital requirements. If there’s a killer micro that is somehow time-sensitive most of us have things laying around that we never use that we can sell to raise the cash. eBay has turned the entire world into a giant non-stop yard sale. Look around for things you haven’t touched in 5 years. Use those things to fund your venture (and you’ll save on that storage unit too).