Financing Small Businesses

One of our continued focuses as it has related to these articles is the constant need for financing amount small businesses. Most importantly, we have discussed the many ways that are available for a small business to receive the capital that it needs in order to launch operations or achieve business growth.

Foremost, we recommend that if you are a business that is in operation that you continue your search for debt capital. This is primarily due to the fact that debt capital comes at a much lower cost than having to sell a substantial portion of your business to a third party. This has been one of the common themes throughout our discussions and we are going to continue to focus on the appropriate uses of debt capital. Most importantly, if you are seeking a business loan, whether it is conventional or from the Small Business Administration, that you have a significant amount of tangible assets in place to back the financing that you are seeking. It is imperative that you have collateral if you are seeking conventional business funding from a bank or a financial institution.

Additionally, one of the things that you can do if you do not qualify for this type of financing is to work closely with a private funding source, such as an angel investor, as it relates to your capital needs. One of the things that these private investors may be able to provide you with is the down payment that you need for conventional bank financing or lease financing. As we have discussed before, these individual financiers will be able to provide you with a significant amount of information and expertise as it relates to your business. As such, we strongly recommend that if you cannot receive a bank loan that you seek out a qualified business partner or angel investor that can assist you through this process.

In closing, financing a small business is extremely difficult. There are many risks involved whether or not you are seeking debt or equity financing. When it comes to receiving a bank loan you can expect that you are going to have to provide a personal guarantee on each dollar that you borrow. As it relates to equity capital or money from a private investor you are going to need to sell a significant portion of your business. Prior to seeking any type of financing you should always consult with your business advisers to determine which methodology is in the best interest of your business.