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More than half of all new ventures in Britain close within the first three years of opening. That is not an encouraging statistic for anyone who wants to start a business from scratch! There are lots of reasons why small businesses stop trading, though. These are said to include poor market research, bad management and even fraud. However, a shortage of working capital remains one of the main reasons why many small ventures cease to trade. Finding the capital to start a new business is not easy. Financial institutions are normally reluctant to advance new businesses start-up capital because of the obvious risks involved. Nevertheless, some private equity firms are prepared to undertake seed financing especially if your ideas are fresh and innovative. Unfortunately, you may have to relinquish some managerial control in exchange for their money! According to Business Link, getting loans from family and friends is a popular way to raise capital too. Business Link said family loans tend to be informal and based mainly on trust and verbal assurances. Consequently, it advises people planning to go down this route to come to a businesslike arrangement. This may be in the form of formal contract to avoid pitfalls later on. Government grants are another source of financial support. Organisations such as NESTA are particularly helpful for people who need money to take new technology to market. NESTA, which is funded by the National Lottery, can also provide mentoring and marketing experience. Banks are another obvious source of funds. However, if your business only has brief track record, banks will normally require personal guarantees. Nevertheless, the DTI may be able to provide guarantees under its Small Firms Loan Guarantee Scheme for companies with annual turnover of no more than £3m. Clearly there are many ways that people can finance their money-making ideas. But choosing the correct type of funding is important. In my experience, business bankers should be your first port of call, and more often than not they will point you towards the right source of financing for your business. More: Business Banking | Four Steps To Starting A Home Business