Obtaining funding is one of the biggest obstacles to starting a new business. If it takes money to make money, how does one ever begin? No matter how resourceful you are, there is no denying the need for at least some money to develop a product or service for the first few customers. Sadly, securing startup financing is rarely an easy task. Entrepreneurs soon learn that their 'great idea' might impress friends or family, but getting people to bank on you with cold, hard cash is more difficult.

Here are some of the biggest obstacles to getting funded:

No Track Record

By far the biggest handicap to getting funded is not having a track record of proven entrepreneurial success. Simply put, investors (whether it's a VC fund or a wealthy, retired businessman) want to invest in sure things. Peter Ireland, author of the Smart Startup Guide, put it bluntly when he said:

'If your name is not synonymous in the minds of financiers with huge, almost obscene, profits, your plan will be accepted politely but never actually read beyond the 'team' section.'

Even if you are only seeking a small angel investment (say, $20,000) from a local investor, the same rule applies. No one wants to roll the dice on an untested novice with no track record to speak of. From the investor's standpoint, there are simply too many uncertain variables that could cause the business to fail.

No Traction To Date

Another common mistake is seeking funding on the premise that once you get funded, you can finally, at long last, actually get to work.

As Ireland writes, 'at some point in the mid-1990s real entrepreneurship became subverted into merely writing a business plan, developing a Powerpoint presentation, scripting an 'elevator pitch', and then pestering skeptical strangers for money.' This, again, is not the way to get funded.

The kind of company investors want to fund is one which is already generating cash flow (or at least demand) from real customers, and simply needs money to grow. Conversely, if all you have to offer is a polished business plan and 'the best of intentions', investors will tend to assume that you are not worth their time.

No Credentials

Depending on how much money you are seeking and from whom you are seeking it, your credentials could become a factor.

Let's say, for instance, that you are looking for bank financing to become a real estate investor and buy your first property. When filling out the application, loan officers will likely ask what your qualifications are to be managing rental property. Have you obtained a business degree? Taken accounting classes? Worked as a property manager for another landlord?

If not, the lender or investor in question might conclude that you are simply unqualified to do what you are borrowing money for.

No Clear Business Plan

While a business plan alone is no guarantee of funding, lack of a business plan virtually guarantees that you won't get funded. The reason is that no one wants to put money into an open-ended 'project' without structure or a profit strategy. Unless the investor you have in mind is incredibly unsophisticated, they will want to know:

• How much money you need

• Why you need exactly that much

• What you plan to do with it

• How (and when) this will produce a profit

Merely telling the investor what you 'might' be able to do with the money makes them believe that you do not have a real plan in place and that perhaps investing in your business would be a poor choice. Instead, try to quantify your goals with numbers, dates, targets and the overall strategy that ties everything together.

Insufficient Personnel

Even if you have a solid track record and a credible business plan, you are unlikely to secure funding without a 'winning team.' Let's say, for example, that your business idea involves a new social networking site. No matter how enthusiastically an investor believes in your concept and strategy, the bare, crass fact is that it will never get built without a web designer.

If you cannot obtain the needed talent, your ideas are nothing more than pipe dreams as far as investors are concerned. Put the right pieces in place, however, and you suddenly look like a much more formidable team.

Wrong Corporate Structure

If you are seeking venture capital funding, sole proprietorships, partnerships or LLC's will not do. The problem with these corporate structures is that they do not lend themselves to clear-cut divisions of ownership. With an S Corporation or C Corporation, an investor can put money into the business and immediately claim a set number of shares or percentage of the company.

Therefore, if you are dead set on obtaining outside capital, consider re-incorporating as one of these 'investor-friendly' entities first.